Reply to Is owning a rental property a good investment?

Forum Index » Money and Finances

Reply to "Is owning a rental property a good investment?"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous]If $1200 per month will cover your mortgage--sure. But it shouldn't cover "most of your mortgage." It should cover all of it, plus your taxes, with a little buffer for vacancies in order for it to be income generating. If it's an area where you expect rents to rise you could maybe be a little under that for a while, but in most part of New England (perhaps excepting Boston) that isn't a sure thing right now.

[b]If the primary purpose is just to be sure you'll have a home that you can eventually give to your son, that might be somewhat different math, though.[/b][/quote]

Would you buy property in NoVA that did not cover monthly mortgage (covers only interest and taxes but not principal) if the objective was to buy a place that your kid can use in about 10 years or so?  If this place turns into a Bay area what with all the Tech companies moving away, would that not be a good investment (assuming of course I can cover the principal as well as any deficit arising out of the occasional vacancy)?[/quote]

No, definitely not. Not because it's not a good investment (although it isn't!) but because if home prices are that out of sync with rents, it is a huge red flag of an oncoming housing bust, at least in that region. You'd be far better off waiting for the rents and home costs to level out if you don't need the property immediately.

The only exception would be if the rent would cover the principal for a 30-year-loan but you choose to do a 10-year-loan to pay it off faster. Then I'd be okay with the home being cash flow negative in exchange for being paid off by the time you need it, because you'd always have the option of refinancing into a longer loan if needed.[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics