Just received 100k from the sale of my equity in a business and am thinking about investing that in rental property.
I've run the numbers and they've come out as:
Purchase price of 4-unit - $140k
100k down payment
40k mortgage (30-year at 3% - from family)
Rental income - 2k (4 units at 500 per month)
Mortgage - 169
Property Taxes - 167
Landlord Insurance - 225
Property Management - 200
Maintenance - 250
Total Income - 2000
Total Costs - 1011
Net - 989
All numbers are by month. Of course, I would also need to consider income taxes as well as the tax deductions that I would receive for depreciation and expenses.
Anything else that I need to consider? Does this seem like a profitable venture and a good investment?
>>1146186
Why put in 100k at the start? it would take 8 years for you to get that back.
Why not just keep your money in the bank for the same amount?
Why only 500 dollars a month per unit? That is incredibly cheap, unless you are not including any utilities at all.
>>1146411
They say any profit is all a bonus that the real money is in the value so best to keep the down payment low
>>1146186
You need to use leverage to your advantage. Why put down 100k on a 140k property when you could but down 20%(bank minimum) and use the rest as a down payment on more property thus having more income? 100k should get you 500k in property, not 140k.
>>1146423
But if I want to minimize risk and reduce my payments, wouldn't paying it off be a good idea? (market is looking risky, banks paying nothing, bonds at essentially zero, don't want multiple properties as I'm just a beginner, etc)
>>1146260
Putting it in a mutual fund, although hated around here, could be a good move. Let's say conservatively that you gain 4% interest per year for 8 years, reinvesting all money made, after 8 years you will have $37,000 profit. (Funds of 8% returns and over aren't exactly uncommon however are a little more risky, but for the sake of argument 8% with the same variables will have $89,000 over the 8 year period. Let's say you continued with the 8% rate for an addition 5 years, you would have $181,000 profit 13 years after you first invested.)
Compare this to potential rental incomes from this, it doesn't really compare.
There's most likely better ways to invest your money. Even memstocks, if you know what you're doing, would be a substantially better investment. What's the point on having money when you're retired, and too old to truly enjoy the perks which come with it. I'd rather have some safe investments which will ensure financial security, and gamble a bit on riskier ones which can net a larger profit, much quicker.
Might not be the /biz/ way, but hey ho
where do you live that you can buy property for 140k?
>>1146455
St. Louis
Here's a 4 unit in an up-and-coming area for 109k
http://www.zillow.com/homes/for_sale/Saint-Louis-MO/apartment_duplex_type/2942419_zpid/6891_rid/100000-150000_price/362-543_mp/any_days/size_sort/38.625756,-90.213804,38.544775,-90.298176_rect/13_zm/0_mmm/
>>1146445
You're still better off keeping the cash. Even in a downturn, a rentable 4 plex isn't going to crater in value due to the revenue producing part.
>tax deductions that I would receive for depreciation
These things don't usually depreciate. Typically their value acts as a hedge against inflation.
>>1146208
He can always raise rent when the lease is up.
>>1146551
Although the property is more than likely appreciate in value, he gets to depreciate them on his books.
>>1146186
you need to consider closing costs and having an emergency fund.
also hiring a property management company for a 4 unit is extremely lazy. they are nothing more than a middle man. you still have to shell out for all the repairs and what not. in fact, if they let in a shit tenant that trashes the place i bet they wouldn't even take responsibility for it.
>>1146634
closing costs would be negligible (probably about 1k for my lawyer to write mortgage and the deed transfer), as I would be getting the mortgage through my family.
>>1146690
bulk of the closing cost comes from the title company.
