First time RE investor in the Houston area. I’ve been going crazy trying to figure out the most optimal way to purchase a rental property. Looking at a home listed at $270K...continued inside.

like
Posting as :
works at
You are currently posting as works at

Seller will take $260K. I’m putting 30% down. Rental comps $2,100 - $2,400/mo. This home was being rented for $2,350/mo before recently listed.
Considering two options:
15 YR loan @ 3.4% APR
30 YR loan @ 3.75% APR
No buy down on either loan. With rental comps, I should be able to do the 15 yr and breakeven year over year (~$2,000 payments for me), but maintenance will cost something. Obvious advantage is getting the home in 15 years instead of 30. With 30 year loan, payments are $1,600 all in and will generate $600-$800 cash flow per month, but of course the interest over the lifetime of the loan is much more.

I realize there is an opportunity cost here (I could reinvest the $600-$800 in cash flow per month at a higher return). But with that logic, why buy real estate at all? Diversified portfolio? Anyways, I’m torn. If it makes a difference, I have a good amount of liquidity and could fund repairs without the rental cash flow from the 30 year loan. It’s also possible that I might sell the house 5-10 years down the line.

Thank you fishbowl for any and all advice / criticism!

Multiply your rental income by 70% to get a better representation. Taking 30% off covers insurance, property tax, and forecasted maintenance. Based on these numbers you’d be CF negative on the 15 year - income positive, though. I’d go with 30 year. It’s an ok deal for the Texas area

Purely on the loan aspect, take the 30 year fixed. Locking in this all time low interest rate for as long as you can is a win.

Overall, are you sure you're factoring in all costs?

Thanks! Honestly, I’m not expecting to make anything in the first few years except the equity in the house and the hopeful increase in home value as time moves along. I’m too new to expect great returns at this point. Anything in terms of positive cash flow is a bonus. This doesn’t make my return look very desirable, but I’m more interested in maintaining a diversified portfolio than investing more in the market at the all-time-high prices. Time to get this thing leased!

like

Congrats Op. You have a good perspective on measuring returns.

I generally compare it against the market and savings accounts - somewhere in between - for managing expectations

Related Posts

What Gen Z wants everytime they complete a task:

Post Photo
likefunny
funnylike
like

EY PAS said that they can’t offer more than 115k for senior associate in Chicago. I find that ridiculously low since accenture t&o is offering people 140k to join as a consultant. It is from my understating that ey associate is equal to analyst and sr analyst at Accenture. Then senior associate is equal to consultant/ sr consultant. What am i missing here?

like

Going to Tulum, Mexico is December for New Years. Can anybody tell me if that place is safe and reccommend anything? Already bought the plane ticket cuz the virus made them cheap so no turning back...

like

Anyone have a recommendation on a good portable monitor to connect to my laptop? Preferably no power cord required and a decent resolution to use with spreadsheets, pptx etc. Thanks!

like

I currently work in SaaS software implementation and really want to break into product management. I am finding it hard to get interviews. I feel that I have a ton of transferable skills - agile delivery, customer insights, working with ui/ux, engineering, marketing, business, IT to get something shipped and more. Anyone willing to help me out? Review my resume?

likehelpful

Sprint is still the absolute worst. Never before have I wished incurable gonorrhea on such a lousy lot

likefunnyhelpful

What’s your biggest weakness? And which quality is that related to?

like
like

Best ad agencies to start as a creative?

Short-term goals = to learn from talented creatives and work for a shop with good culture

Long-term goal = writing super bowl ads, winning lions, etc.

like

Is ServiceNow flexible with being completely remote for most roles?

like

Global logic or TCS

like

When did you know that the person you were with was The One?

Who’s excited for Lover??? One month to go!

like

Do tcs change the offered ctc if we counter it with higher ctc offer?

like

Please can anyone from Disney assist with a referral

like

How long should one expect to get an offer after interviewing for an account manager role at Meta?

like

IM shop wants to recruit me, I "let them on" but I'm no longer interested. How can I express that without burning bridges? Help!

like

Additional Posts in The Real Estate Bowl

Hi 🐠, need your help/suggestions. We moved into our new townhouse 4 months ago and I’ve been noticing a car parked outside with 3-4 (young folks) people sitting in it for past 3-4 weeks. Today they took it to another level when someone from that group was peeing right in front of my backyard. When I was about to talk to them they left in a hurry. What should be doing? I’m first time homeowner so want to make sure I’m not doing anything wrong

like

30 days till closing and I’m entitled to 2 more walkthroughs. Sent preferred dates and time to realtor last week and she said she would get back in a couple of days. I haven’t heard from her for a week, sent a reminder yesterday and she said the dates were confirmed and she thought she had told me. I asked for a change in time as something came up, and she said she would arrange it and hasn’t got back to me yet. Before she would reply within 15’ to an hour max. What happened?

like

Hi, need some advice because very new investor when it comes to owning personally versus LLC. Currently own my home and planning to purchase two lots of land sooner rather than later. With three real estate assets under my arm, getting a little worried about having them all under my personal name. Should i create an LLC and purchase the lots under that name? Should i transfer my first home?

like

Hey guys, I’m looking to invest in the purchase of land in Austin. Because it’s not commercial or residential investment at this point, I’m at a loss for financing options. I’m short $100k. Any ideas on where I can get a loan from for this?

like

I’m looking to buy a property in Costa Rica or Panamá, any tips on banks that do international mortgage?

like

In NYC, saw several properties structured as condops. It has more lenient rules about subletting than co-ops and no board approval when transacting. Granted it’s building by building, but would someone recommend condop over co-op in general? Do they appreciate the same as condos?

like

Closing in 11 days. Excited to get the house but I hate moving.

like

Curious about thoughts on on discount points (I think I’ve already read every article on Google). I am refinancing my personal residence (future rental) as well as a rental property. The mortgage brokers discourage me from spending a ton on points (rolled in, not up front). In some cases, it’s a 16 year break even. I get that’s a very long time to break even, but I have no intention of getting rid of the properties and doubt rates will drop much below current. Max breakeven point for you?

like

What has been your most successful lead generation technique?

like

My spouse and I are buying our first house soon and we are thinking of renting out a room. Anyone who is currently doing this or has done it before? Would you recommend it or is it too much of a headache?

like

Would love everyone’s thoughts! Which of these two options would you pick if your goal is to buy and hold for appreciation purposes given these are in a very hot market. Both same lot size.

Option 1:
- $175k lot located on very busy street but across the street from new $700k townhomes and restaurants

Option 2:
- $250k 3 bed/1 bath fixer upper located at end of dead end street, houses on street all fixer uppers, located down the street from Option 1 (so also near new builds and restaurants)

like

Looking for a recommendation/referral for a good retail business broker in Chicago or Suburbs. Bonus if in the liquor industry. TIA!

like

Anyone in the DMV area and interested in joining a young RE investors club?

like

Looking to buy a 900k condo in a prime location (3 bedrooms). We have a family income of 210k and have been approved by the bank with 20% downpayment. We have zero debt other than current mortgage but we will sell the property. We really want it, but even though we were approved I feel like its a bit over the top.. anyone has any insight in terms of our ratios?

like

One item borrowers shopping for mortgages get too caught up in is rate. Most borrowers don’t know how to read a loan estimate and get taken advantage all the time. Just because a lender/bank offers you a low rate doesn’t mean it’s best deal. Most cases, especially now since rates have gone up, you are being charged points for some of these lower rates in the 4s. If you don’t know or understand discount points feel free to shoot me a message and I can help you review estimate and see if can beat

like

New to renting out my place - i have a security system. Does that cost shift to my tenants and they get access to the codes and cameras etc?

like

Any recommendation for Cheap moving options from Wisconsin to Charlotte, NC.

like

Question for my tax gurus. Want to refinance my rental property. I assume I can deduce closing costs, new interest expenses. The cash im pulling out, however, is going to a personal reason. If al@this above board? I’d love to be able to increase my interest expenses in a tax deductible part of my finances (I take standard deduction).

like

Hey all ! Need some guidance . I am planning to buy 2bd ,2ba in Atlanta near grant park , Inman park , reynoldstown , cabbage town , OFW area . Budget is 250,000 to 350000. It is more from investment purposes than anything else . Also my thinking is that buying place near belt-line will promise me better returns . First timer, on h1b and a female (single and no family ) if that helps . Need some guidance on my thought process and also referral on a real state agent

like

I need some help. So I have an apartment I previously rented out through an agent. This time around I listed it myself on Zillow. Found a person interested. She’s a section 8 tenant, so I’m curious about the right steps to follow. How do I go about drafting a leasing agreement? She said her case worker said her new voucher goes into effect November 1st.

like

New to Fishbowl?

Download the Fishbowl app to
unlock all discussions on Fishbowl.
That was just a preview…
Sign Up to see all discussions
  • Discover what it’s like to work at companies from real professionals
  • Get candid advice from people in your field in a safe space
  • Chat and network with other professionals in your field
Sign up in seconds to unlock all discussions on Fishbowl.

Already a user?
Login here

Share

Embed this post

Copy and paste embed code on your site

Preview

Download the
Fishbowl app

See what’s happening in your industry
from the palm of your hand.

A phone with Fishbowl app

Send download link to your phone

OR

Scan your QR code to download
Fishbowl app on your mobile

By continuing you agree to Terms of Use and Privacy Policy.

Messaging rates may apply

Download app

Sign up for free to view this conversation on Fishbowl

By continuing you agree to Terms of Use and Privacy Policy

Already have an account? Log in

Sign up for free to continue using Fishbowl

By continuing you agree to Terms of Use(New) and Privacy Policy(New)
Messaging rates may apply

Already have an account? Log in

For account settings, visit Fishbowl on Desktop Browser or

General

Legal