Question:

Advice on real estate investments?

I saw a two bedroom condo in my complex for sale for $65,000.00 online. I pay $600.00 a month for my 1 bedroom apartment. Say I borrowed the $65,000 from a bank to buy the condo. I pay 5% annual interest on a 30 year fixed at $300.00 a month.I can rent out the property for at least $600.00 a month. I'm not sure of my math here but I think I would clear at least $200.00 a month. With owning that property I can borrow against it to buy another property and so on. I guess this is why people get rich in real estate. I see my path but am nervous. What should I do?

Answer:

Take a advice from expert real estate agent or professional financial.
So add home owners insurance, property tax, and maintenance to that monthly fee = most likely you will peak out over $600 and make nothing on a monthly basis for this rental. Real estate investors typically make their money on the equity (pay low, sell high). Not on the monthly rental amount.
You better rethink your plan. You have not done the math. There is a monthly maintenance fee, utility bills, property taxes,insurance and possibly garage parking fees to start. Then, most condo complexes do not allow owners to rent out their condos. The bank will not give you a mortgage for the full price. Then there are closing costs,lawyer's fees, utilities deposits and inspection fees.You must have all these funds in your bank account on closing day.
Income property is one of the best investments that not only protects against inflation, it can also provide many tax benefits. However here are some factors you need to also consider: 1. Don't assume you will have the place rented quickly or for the full year. For the months when the place is not rented, you still have to pay the mortgage. 2. Screening and choosing a tenant is a highly risky exercise. Everyone who owns income property has been stiffed by a deadbeat who wouldn't pay costing you months of lost rent and the costs to evict them. 3. Unexpected repairs will occur, especially since renters generally don't treat the property as you would. So, make sure you have a cash reserve to cover at least 6 months of mortgage payments plus property taxes and insurance. To minimize the risk on no. 2 - hire a realtor to list and screen tenants for you. The expense is well worth paying since you can write it off as professional fees and commissions. Good luck!
You've left off so many expenses. What's the condo fee? Also taxes and insurance. Also how much are you putting down, did you figure that in and where do you get that money from. Also, figure that vacancy, maintenance and repair will be 20% of rent minimum, maybe as much as 30%. Are you going to manage it yourself and if not thats another 10% of rent (around here its 6-8% mgmt fee plus one months rent every time a new tenant is needed). You also left off the taxes you'd save from depreciation which would add a bit to income. Have you also considered all the time and effort and headaches of dealing with tenants and all the problems that come up. I'm not completely downing the idea (I am a real estate investor) but if you just buy any old condo off the market, pay the going rate, and then rent it at the going rate then you aren't going to do that well - I mean any idiot can do that, you need to get a great deal to really make the money. I'll bet if you ran the numbers on this deal and were able to accurately figure everything out you'd see a breakeven cash flow to a modest return but over time the place will go up in value and that could be huge, eventually.

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