Can I make money with income property?
This is a questions asked by a number of people who realize the many advantages of owning real estate. Owning income property is not easy however, in the long can be very rewarding.
For example if you purchased a duplex today and paid $1,300,000 and put down 35% (most lender’s requirements), at an interest rate of 4.00% your monthly payment to the bank would be $4,034.16 per month.
Let’s assume for your $1,300,000 you can purchase a duplex with one side having 3 bedrooms, 2 baths, and 1 car garage/carport, and the other side having 2 bedrooms, 1 bath, and 1 car garage/carport. What would those two units bring in form of rent on a monthly basis?
What I want to do is be a bit conservative here and not give you top of the market rents. After all you want good tenants that are will and able to pay the rent monthly without over extending themselves.
Let’s say we can get $3500/month for the 3 bedroom unit and $2500 for the 2 bedroom unit. That’ll give you a monthly income of $6,000!
Seems like a no brainier doesn’t it? Well maybe yes and maybe no. Let’s look at what other expenses and or costs you may incur along the way.
When you purchased the income property did you get inspection reports and pest inspection? If so, were there issue brought up in those report that indicated you may have to do some repairs in the near future. Such as was one of the heating systems at the in of its life? (functional obsolescence) If so the possibility of getting a call from your tenant next Thanksgiving saying they have just turned the heat on and it doesn’t work and they have a house full of quests coming for Thanksgiving Dinner. (Can we say emergency service call?)
That example is easy to fix and make everyone happy. However, there are other items one needs to be aware of when buying income property. Some is really good and others not so much. Read more…