Hello all,
I have been following the forums for some time and have learned tons. Thank you! I will give you my scenario, and I would love some feedback from more experienced investors about what they think.
I`m a young (25 year old) investor who is just starting out focusing on student rentals. My first (and only) property is very close to the university/bus/ammenities, meets 10% rule, the demand for places this close is very high and have no concerns about vacancies (Had 7 groups go through it less then 24 hours after I posted ad and 5 groups wanted it). It is currently rented until April 2010 for $2200/month. This will give me a positive cash flow of $300/month. I am very highly leveraged (Only have 5% down) and bought in summer.
I have a very secure job as a teacher where income is guarenteed to go up slowly year after year. I live cheaply, to the point where I can save $1000-$1300 a month from my teaching salary. I`m not going to buy a primary residence for a while in order to save $$ for investment properties and to increase ability to get loans from bank. I have $40,000 in stocks and savings. My only debt is the rental property mortgage.
I want to buy another property. I see a great time to grab a deal and great interest rates. I am looking to do the cookie cutter approach which limits risk. There are a couple of very similar properties close to my own that I can pick up at a better deal then what I picked mine up for due to a changed market.
The properties I`m looking at are student lodging houses. They will run around $240,000 and require 20% down. My generous parents will allow me to take a secured line of credit against their home to make it happen. I would then allow my money in stocks/savings grow while acting as a slush fund with the bonus of being able to write off the interest on the loan from parents. It would be payed back over time with positive cashflow and/or a refinance down the road. Essentially the place would be 0 down for me. I dont` see point of having my money in it if I dont` have to... ROI baby!! The one property I`m most interested in is currently tenanted, meets 10% rule, and just down the street from my current one, so I know there will be no issues to rerent it. I will get a fixed rate of 5 years on second place to protect me from rising interest rates as I`m very highly leveraged. (Other place has variable prime -.5).
A further decrease in market place would essentially leave me with negative equity, but I`m holding long term and have a good slush fund. I can even move in! Worse case scenario I see is I have a bit of negative cashflow from a tenant bailing out or really bad maintanence luck, and the market continues to go down. That is just a blip in the long term game and easily handled...... the only disaster is being forced to sell, but I can`t see how that would happen. Opinions? To buy or not to buy???
Thanks
Adam.
I have been following the forums for some time and have learned tons. Thank you! I will give you my scenario, and I would love some feedback from more experienced investors about what they think.
I`m a young (25 year old) investor who is just starting out focusing on student rentals. My first (and only) property is very close to the university/bus/ammenities, meets 10% rule, the demand for places this close is very high and have no concerns about vacancies (Had 7 groups go through it less then 24 hours after I posted ad and 5 groups wanted it). It is currently rented until April 2010 for $2200/month. This will give me a positive cash flow of $300/month. I am very highly leveraged (Only have 5% down) and bought in summer.
I have a very secure job as a teacher where income is guarenteed to go up slowly year after year. I live cheaply, to the point where I can save $1000-$1300 a month from my teaching salary. I`m not going to buy a primary residence for a while in order to save $$ for investment properties and to increase ability to get loans from bank. I have $40,000 in stocks and savings. My only debt is the rental property mortgage.
I want to buy another property. I see a great time to grab a deal and great interest rates. I am looking to do the cookie cutter approach which limits risk. There are a couple of very similar properties close to my own that I can pick up at a better deal then what I picked mine up for due to a changed market.
The properties I`m looking at are student lodging houses. They will run around $240,000 and require 20% down. My generous parents will allow me to take a secured line of credit against their home to make it happen. I would then allow my money in stocks/savings grow while acting as a slush fund with the bonus of being able to write off the interest on the loan from parents. It would be payed back over time with positive cashflow and/or a refinance down the road. Essentially the place would be 0 down for me. I dont` see point of having my money in it if I dont` have to... ROI baby!! The one property I`m most interested in is currently tenanted, meets 10% rule, and just down the street from my current one, so I know there will be no issues to rerent it. I will get a fixed rate of 5 years on second place to protect me from rising interest rates as I`m very highly leveraged. (Other place has variable prime -.5).
A further decrease in market place would essentially leave me with negative equity, but I`m holding long term and have a good slush fund. I can even move in! Worse case scenario I see is I have a bit of negative cashflow from a tenant bailing out or really bad maintanence luck, and the market continues to go down. That is just a blip in the long term game and easily handled...... the only disaster is being forced to sell, but I can`t see how that would happen. Opinions? To buy or not to buy???
Thanks
Adam.