Home Buying in New Jersey>Question Details

Loki, Home Buyer in New Jersey

Buying a house because of Rental Income

Asked by Loki, New Jersey Wed Aug 6, 2008

Hi

I am a first time buyer about to buy a house in NJ. I want to rent the new place I am buying and at the end I will have to pay 1000$ extra every month after the expenses.

#1 How much of a good decision is to buy a house just because of the lure of getting rental income on it and increasing my chances of selling out when the market improves.

#2 Am i missing on any of the expenses ? I have included tax,insurance,heat,hot water,budgeted for 120$ a month on unknown maintainance.

Any other advise please feel free to give, I am a 1st time home buyer.

thanks..Loki.

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Answers

7
As an investment I wouldnt buy any property that had a negative cash flow. Most banks will qualify you based on about 80% occupancy. If you are assuming 100% occupancy, that wont happen. What will happen is late or missed rent payments, broken appliances, rising utilities,rising taxes...The market for renting is getting better and likely will continue but what will you get in the mean time for that $1000/mo? What if the value of the property drops as is happening now in most areas?
2 votes Thank Flag Link Wed Aug 6, 2008
My advice is a little different than the others and I blogged about this query In May. My adivice is that the new real estate investor should stay away unless they have deep pockets and a thick skin. I know that this is in the face of much of what you hear in the media and people trying to make a living but if you want to read more about it you can click on the link below that will take you to my full post. I hope it helps…
Regards,
Dave
1 vote Thank Flag Link Thu Aug 7, 2008
You also should have a year's mortgage payments on hand, just in case. Be sure you are able to carry it yourself for that amount of time.
Web Reference: http://www.dianeglander.com
1 vote Thank Flag Link Thu Aug 7, 2008
A lot of good answers here. As an investor in the current shifting market, If you purchased the property well below fair market value and you've done your homework relating to rents, income/expenses and location you may do very well. Lots of folks are renting now and looking at possible lease to purchase options as well. Having a good real estate attorney and accountant available may come in handy should legal issues arise.

There are lots of options for investors. As the market continues to shift you may decide to rent right now, offer a least to purchase option later, and maybe sell it in the future. Several investors I have worked with are doing well with their properties. Planning ahead may keep you out of the "Red" and put more green in your pocket for years to come.

Congratualtions and good luck!
0 votes Thank Flag Link Thu Aug 7, 2008
Landscaping, upkeep, appliance repair, wear and tear, HOA, supplemental taxes, school bonds, neighborhood improvement projects, property boundary (fence) replacement and maintenance, garbage and sewer. You may need a 20% dp due to the rental plans.
0 votes Thank Flag Link Wed Aug 6, 2008
Have you checked the rental market in your area? Have you included money in case you have to evict the tenants or take other legal action?
And most important is the location of this property, all markets are local and improvement in one area might not mean improvement in another.
It sounds a big sum to come out of your pocket monthly. I'd also check with an accountant to get all the info on the depreciation you'll be able to claim on this investment.
0 votes Thank Flag Link Wed Aug 6, 2008
Is this a multi family home? In that case it can be a great investment.
0 votes Thank Flag Link Wed Aug 6, 2008
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