Rental property

Training 745 minutesrental property investing

You are 43 and run a construction crew. You have $45,000 and want rental income. An agent shows you a $160,000 apartment.

Training goal: Buy a property that actually pays

Situation

1. The agent: "Rent is $1,450, the mortgage is $758, so $692 a month profit!"

2. The apartment is yours. The first applicant offers 3 months in cash upfront, but no documents or references.

3. In winter the water heater dies: $1,200. The tenant has no hot water.

4. A banker friend offers a second apartment fully financed. Projected cash flow: $50 a month.

Find a home for sale and a rental nearby. Work out cash flow: rent minus mortgage, tax, insurance, 10% repairs and 5% vacancy.

Is rental property a good investment?

It can be, if cash flow stays positive after all costs and you hold a reserve. Factor in management time and vacancy risk.

What expenses do landlords have?

Mortgage, property tax, insurance, repairs, vacancy, and sometimes a manager and utilities. Many budget 10% of rent for repairs.

What is the 1% rule in real estate?

A quick filter: monthly rent should be about 1% of the purchase price. It is a screening tool, not a full analysis.

Numbers are illustrative. A game, not financial advice.