sdcellar, you’re right about depreciation and expenses. Those are the write-offs I was referring to. Here’s a rough number, but since you can only depreciate the house and not the land, I’d assume I can probably depreciate only about $150k. Divide that over 27.5 years and you’re looking at $5455/year in depreciation. Here’s a quick list of what you can deduct:
* Advertising
* Cleaning and maintenance
* Commissions
* Depreciation
* Homeowner association dues and condo fees
* Insurance premiums
* Interest expense
* Local property taxes
* Management fees
* Pest control
* Professional fees
* Rental of equipment
* Rents you paid to others
* Repairs
* Supplies
* Trash removal fees
* Travel expenses
* Utilities
* Yard maintenance
So, the depreciation alone will more than cover for the 5% you would use as “overhead”.
We are also not accounting for inflation at all either. If the next 10 years is like the last 10 years, i.e. inflation at average of 2.57%/year, you can expect rent to increase about 50% in ~15 years.
I haven’t seriously run all the numbers yet, since there’s nothing out there that’s coming close to the numbers I want, but I’m thinking about combining SD R’s idea w/ my idea. Which means, I don’t have to worry about my tenant leaving unless they die.
Yes, you have to pay tax on the net income you made. But that’s a good thing if you made a profit. I don’t know what it is today, but I think you can get 5% a few months back. Just did a quick search on aimloan.com to get a sense of where rates are today, if you don’t want to pay any point, it’s at 5.25%, but you can get 4.5% w/ 3.11 points.
Also, my goal for these investment property is to be my retirement income and not so much as income in my working years. Although if I make a profit right off the bat, that would be great. I figure, if I get 5 property, yielding $2k-3k/month in rent 30 years from now, my monthly income would be $10k-15k, since I would have all the properties paid off. That should be more than enough to retire on, since my house will be paid off as well.
