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"my tenant's rental income covers the mortgage"

By Oxygen follow Oxygen   2012 Apr 19, 7:43am 1,254 views  1 comment           share      

Need some more technical insight to discourage this dumb thinking:

MMP = monthly mortgage payment

- If the home insurance and property taxes are not in the mtg payment, then you're really fooling yourself.
- MMP fluctuates if there is an escrow portion
- MMP fluctuates if it is IO ARM
- MMP doesn't include repairs and capital improvements, which can be x times more than annual rent
- MMP doesn't include HOA fees
- MMP doesn't include sweat equity and time
- Water bills, etc

#housing

1   someone else   2012 Apr 19, 8:05am  

Depends on the rent vs the price!

If your gross annual rent divided by purchase price is 8% or more, then it's true, your tenant's rental income probably does cover the mortgage, property tax, maintenance, and everything else.

But to get that kind of yield, you need to be able to collect the rent reliably. The best yields are in bad neighborhoods, where collection is harder.

Check my calculator for conservative estimates of house values based on rents:

http://patrick.net/housing/calculator.php

If you need to see recent rents in various areas, please consider subscribing to Patrick.net Premium:

http://patrick.net/housing/subscribe.php

Note you can write an Open House Review for free access for a week.

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