Advice for Rental Properties

[Scogin]

Hey guys, I am looking for some help from anyone who owns or knows a lot about owning rental properties. The wife and I are looking to buy our first home in the first quarter of next year. My plan is to buy a less expensive condo or townhome, $150k or less. I believe we can pay this off in 5 to 7 years. I would like to then turn it into a rental property and use the money from renting it to fund buying another rental property. Continuing this process until I am a land baron and own my own country.
I am looking for info on what I should be looking for in a good future rental. I know schools and neighborhood are important. But is there anything that really jumps out as essential?

[Wulf202]

Tons I have well over a decade of full time+ and part time about the same. Ill give you a novel later but im on my phone now.

Skip condos townhouses and anything with an hoa.

[HoneyBadger]

Skip condos townhouses and anything with an hoa.

What if the neighborhood is the nicest neighborhood in town and the HOA is only $20 per month?

[Wulf202]

What if the neighborhood is the nicest neighborhood in town and the HOA is only $20 per month?

Nice neighborhood is not a good reason to shell out extra on the investment. You'd look at $120k for a house in the nice hood but $60k in the crappy hood. You can get maybe $1400 for the nice house but $900 for the bad neighborhood. You can get two houses for the price of one and genrlerate a better roi and reduce your vacancy losses.

I have a 4 bed that I more than double my mortgage on. Didn't put more than %15 into and im under market by alot. Ill be raising the rent by a min of $100 a month.

No hoa ever for me. For so many reasons. What do you get for your fees. When can and will they raise their fees.

If you want to look at mind numbing profitability run the numbers on time shares...

[MrPrena]

What if the neighborhood is the nicest neighborhood in town and the HOA is only $20 per month?

Good argument.

LOL. We bought a house at a HOA. Very clean and quiet. I bought this over other houses, because HOA was only 25/mo, and takes our trash out, exterior property tree/grass work on HOA property, and snow removal.
Within 2 years, they raised it up twice. It was like $67/mo.
They were really really really strict.

Community got fed up, and they changed the manangement. New company made the HOA about 56/mo, and stained and refinished the exterior wood fences. My next door just put their property for rent/lease for ~$1800/mo!

With HOA, gotta pick the right tenant.

[rockhound]

one other thought,

it is not necessarily the best idea to have paid the home off yourselves before turning the home into a rental. yes you will cash flow, but you are all in with your investment then. some of the idea of owning a rental property is that you get some one else to buy you a house

if you have $150,000 of your own money in the property then you will need to recover $150,000 in rent before you break even.

just some round numbers, if you buy a $100,000 home on FHA with $3500 down and live in it for three years and turn in into a rental. round number you have an $800 per month mortgage, your investment would be consider your living expenses for the three years, something you have spent anyway.
if you rent the home at $1000 you would cash flow almost immediately, the $200 per month in additional over the mortgage and $200 a month that is being paid down on your loan with money that came from someone else. in the end you have an asset worth $150,000 that cost you nothing

in your scenario, you paid for your own asset, you have not gained anything, but cash flow, the idea is to gain an asset that does not cost you anything to own.

let the renter buy you your rental

[dwalker460]

Defiinitely skip HOA, Condos can be a PITA for sure, but I have done ok with a couple in the past. I currently have no rentals in the US.

In this housing debacle we have and in some cases still are going through, I have had friends do well and others nearly lose thier ass. My buddy Steve had several properties in Florida and dumped them all because the market is so bad there. My buddy Austin here owns three houses and is doing decently well with them. Success depends largely on making a plan and sticking to it, and part of the plan has to be how you cover the note if it sits empty 6 months.

I personally do not believe in a throwing out any more cash on a rental property than necessary. You definitely want to put down enough to get the note where you need to be, but make sure the numbers will add up. A strategy that will work is to put as little down as possible and keep the note around 2/3rds of what the average comparaple property rents for. So lets say you buy a 110K house, with an average rent for similar property in the area is $1200 a month you need the note to be no more than $800 if possible, and you need to work with your lender to get those terms where you want them.

There are many decent homes out there now in the 60K or so range that will make great rental properties, depending on where you want to be. If your looking 6 or so years down the road there is a lot that can change.

[spqrzilla]

Keeping HOA fees down is good, but the issue with HOA's are boards dominated by the busybodies and those who hate renters.

You will find no condo's without HOA's.

[T-Giv]

My wife and I just bought our first home a few months back. Since it's our first home we had to get the Mortgage Insurance which is almost $400 extra per month. We get to cancel it in 5 years. At that point we are going to evaluate again and potentially look at renting our house out. I have no plans to get rid of this house. I will either be living here or maintain as it a rental when I move to the mountains or to the Springs.

[Wulf202]

My wife and I just bought our first home a few months back. Since it's our first home we had to get the Mortgage Insurance which is almost $400 extra per month. We get to cancel it in 5 years. At that point we are going to evaluate again and potentially look at renting our house out. I have no plans to get rid of this house. I will either be living here or maintain as it a rental when I move to the mountains or to the Springs.

You had to have insurance because you are less than %20 ltv not because it's your first