Need some help

[moevillarreal]

Hello Everyone. I am new as of 10 minutes ago. I am currently working on acquiring a duplex in the Provo, Utah area. I have a general question for you professionals. This is the hopeful beginning of my real estate empire. Here is the question.
Would you ever buy a property to rent out if you were only going to break even or barely make a small profit each month from the rents?

I strongly believe I can get the property for lower than market value. But in the beginning, my margin on rental income would be thin. Thanks

[Blue_Pearl_Granite]

It is all up to you what is good and your comfort level. I have had investors with many units and as long as they get $200.00 per unit profit per month they are happy. I have another that gets $3,200 in rent with a $1,300 mortgage 4 units. Plan for the future and possible vacancys- Can you cover that or if major work suddenly needed to be done plus the mortgage?

[Sparks]

I'd buy them all day long with no money down. Most quality investments require 20% down to get close to that. The trick is buying in an up and coming area that you think will appreciate in value over the average in the long run.

Make sure to save for a rainy day too.

[rynophiliac]

i would do it

my parents bought their first rental property as their own home, they lived in it for 2 or 3 years and started renting it out, at first they were just cutting even on it every month but now, years later they make so much dang money off that house, and have used it to pull equity and get into more houses its not even funny. so i would do it. i fact im trying to do it right now myself.

[moevillarreal]

Thanks for all your input, i meet with my loan officer today to discuss the mortgage, and will have a better idea of what my margins will be. I will keep you all posted. Sometimes its just good to get ideas from others. Thanks.

[jmartin1970]

Most people buy these types of properties for long term equity...not income potential. FYI:o

[nancyarora2020]

"If you rent, you’re throwing away your money.”
“Owning your own home is a forced savings plan.”
“Home ownership is an excellent path to build wealth.”
Common knowledge says that despite today’s large premium, buying a home is a “good investment”. For most people buying a home will result in their largest monthly bill (by far), and because they believe that it will bring them wealth or that they are “throwing away their money” if they rent, they often take on a much larger home debt than a prudent budget would allow. It is a real shame when people are driven to get into the housing market because of misplaced notions of imagined financial benefits. Of course, everyone’s circumstances are different, and for some (particularly those that live away from the coasts) the numbers may actually work out in favor of buying.I am not saying that no one should buy a home, or that my example scenario is a golden standard of truth for all. Don’t take my word for it. Run the numbers for yourself, check out other articles (a small collection is listed below), and do what works for you.Many people will consider all of the consequences — financial, emotional, etc. — and conclude that buying a home is the best decision. Just don’t trick yourself into thinking it’s a good financial decision if it’s not.I myself intend to buy a house some day. However when that day comes, I will be buying a house because I want a nice, “permanent” place to live where I’m the boss, not because I think it will help me get me rich.

[bwiley]

As long as it cover house payment, taxes, and insurance. Make sure you buy the property under market value, so if you don't like renting you can sell it. As far as money your renters will be paying down the mortgage for you, and in the long term that is puting money in your pockets. Just make sure you get a good deal when you buy the property

[FlipItBig]

So you guys are saying "yes"... go buy a property that you barely break even on monthly????? That's insane!! What happens when the tenant leaves? What happens when the water heater goes out? What happens blah blah blah... to have a rental not cash flow is ridiculous. Long term appreciation, blah blah, I get it. You start out like this I can almost gaurantee it's not going to work.

I've always heard of the 2% rule when buying rentals. If you buy a house for $40,000, you should be able to rent it out for $800 a month, or 2%. My two cents.

[Craig@rentalrealproperty]

I bought a property that I barely made a profit on before and to tell you the truth everything has to be perfect to make that break-even point. I needed 100% rent and nothing needing repair. More times than not I would have to come up with money out of my own pocket if something happened. I did make money on the property when I finally sold it. In fact I more than doubled its value. If you have extra money as a buffer it may be a good investment. That's just my thoughts.

[bmc]

Positive cash flow from rental property will keep you stay afloat. If you want to buy a property with only break-even cash flow, you need to make sure that you have cash reserve set aside to meet repair needs and cover vacant period.

[fliprent]

I've purchased properties where the cash flow was less than 100 dollars in the first year but by year 5, I was making 300 a month PLUS I had borrowed 30k in equity from it, for other investments. Factor in rent increases, buy at a good discount, and try to pick an area with good appreciation potential.