Renting out real estate?
Im more curious about it than anything else , but wanting to check I’ve got the right idea for real estate investing
1. Say you pay a 20k downpayment on a 100k property. The other 80k is a loan from the bank
2. You rent out the property at say 1k a month . You use this to pay back the bank periodically. There might be a tiny bit of profit which you use for landlord things
3. After 80 months youve paid ofc the mortgate . Another 20 and you made back your downpayment
4. You now have a 100k house added to your networth that you either sell or rent out
Those numbers are just vague examples , and I didn’t factor in interest on the loan or the house itself but is that the general idea?
- SlumlordLv 72 months agoFavorite Answer
80 months? Where did that come from. Typical loans are 15 to 30 years. The faster you pay the loan, the lower your cash flow. You may be best getting a few 30 year loans and collecting any cash for the next one. Say the mortgage payment is $400 per month (30 yr loan). Vacancy, Maintenance, Repair, Property Management usually run about 35% of rent or a modest house - $350 in this case. Taxes, Insurance and anything else (HOA?) vary alot but all total you might making a small profit, or cash flow neutral, but you do own a 100k asset in 30 years and once that mortgage is paid off the cash flow is great.
My main advice is to buy the place (worth about 100k) for say 50k, spend 30k on repairs and holding costs, and then still rent it out for 1k per month. Wait a few years and refinance the loan and you can get a loan for approximately the same amount as the money you've put into the house. It'll still be cash flow neutral, or close to it, but now you have money to do it again. This will work for a few houses but then the bank will stop loaning to you but its gets things started.
- SCATTY cLv 52 months ago
One important thing you have omitted - Interest. If you take out an 80k mortgage, you do NOT repay the bank 80k. You repay 80k PLUS say 3% interest. You will NOT repay that mortgage in under 10 years.
secondly a cheap house will not rent out at that rent
you also need to pay tax, maintenance etc on said house
You are a little naïve in your thinking
- A HunchLv 72 months ago
Sort of the idea, but not as generous as you picture.
Most people take 30 year loans.
- A 30 year loan on an investment property with property taxes and insurance will likely be at least $700 per month.
- On average you will spend 3% of the value of the property each year for maintenance and repairs ($3000 for a $100k property or $250 a month).
Now you have $50 a month "profit"... if you don't have any other expenses and your tenant always pays you.
- SimplytheFACTSLv 72 months ago
highly doubtful a 100K property will rent out for 1000/month. in all likelihood, your expenses will be about the same you bring in (mortgage, property tax, insurance). the rent might not even cover that, especially the 1st few years
in a few years, if rent goes up, you might start seeing a profit.
you are forgetting about interest. to pay it all back in 80 months, you have to pay MUCH more than 1000
an 80K mortgage is about 1100/month PLUS property tax..if you can even get a 7 year mortgage (84 months)..you also need to pay insurance
you could get a 30 year mortgage for about 400 per month plus property tax (and insurance)..
plus maintenance expenses....
your numbers are way off.
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- Anonymous2 months ago
Maintenance / Repairs
- StephenWeinsteinLv 72 months ago
1. Banks charge interest. To pay back a loan, you have to pay them more than you borrowed. If 80k is a loan from the bank and you pay the bank 1k a month, then you will not have paid off all of the mortgage after 80 months.
2. You can't pay the back all of the money that you get by renting out the property. You have to pay for taxes, maintenance costs, etc.
- JudyLv 72 months ago
yes, you have the general idea.
- SlickterpLv 72 months ago
The general idea, sure, though you didn't consider interest, months without a tenant, costs to evict if necessary, money for repairs, whether $1000 a month rent is feasible in your area, etc.
- AnonymousLv 62 months ago
You got the gist of it, but property taxes have to be paid, you must be able to afford the mortgage if vacancy occurs, etc.
I suggest you read books on real estate investing, you will learn a lot.