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Should We Buy Another Rental Property?

One of the gems I have my eye on. Courtesy of Remax.com

One of the gems I have my eye on! Courtesy of Remax.com

About this time last year, we purchased our first residential rental property. We hit a few snags with getting it renovated and rented, but for the most part, I would call the effort a huge success. We had hoped to add another rental property this year, but with our other investment project bogged down, we decided to wait until next year after the everlasting house flip finally sells. Things never seem to happen on my timeline, though, as a house I have been watching for months recently had a large drop in the sale price. I really don’t know what to do, so I’m asking my readers if we should buy another rental property.

Let me be honest, I am getting a bit ahead of myself. I don’t have financing secured. I have been churning credit cards, which is not a smart thing to do if you are applying for a mortgage. We originally though that we’d use money from the flip and our HELOC to purchase the next property, but that is not available right now.  We do have amazing credit scores, no debt except for mortgages, and a good cash reserve. If we can get a loan, here is why I think we should consider buying right now if the price is right.

Yes, Buy the Sucker Yesterday

  • Location, Location, Location-There are actually a couple of properties available in good locations. One of them already has a good rental history. Both are 3 bedroom, 2 bath properties with around 1500 square feet on sale for around $90,000 or less.
  • Cash Flow-Figuring on 20% down, the mortgage payment would be around $375 per month at a 4.75% rate. Adding taxes and insurance, it should be around $500 per month. Knock off another $100 if we decide to use property management. We should be able to rent for $900-$1000 per month, so bingo, positive cash flow!
  • Interest Rates are Going Up-Since we aren’t the rock stars who can pay cash for a property yet, we have to get financing. Rates aren’t going to get any lower in the near future.
  • Financial Independence– Rental property is part of our long term plan for financial independence. It isn’t totally passive, but when things are going well, it’s really easy to deposit that rent check every month.
  • Extra Money! -Jim just got a new job that adds about $1500 per month to our income. We were going to put this all into savings until we decide how to use it, but we could afford the payments without any pain if it came to that.

No, Run Away As Fast As You Can

  • More Debt– I hate debt, good or bad, and adding this mortgage will increase ours. If we want to have rental properties, it is a fact of life at this point, but that doesn’t mean I like it.
  • Rentals Are Always Risky– Buying a rental property can always end up a nightmare. One innocent looking tenant who turns out to be Walter White could ruin everything. Just because we’ve been lucky so far doesn’t mean we always will be.
  • Spending a Lot of Cash– With any investment property, you almost always have to put 20% or more down. We have more than enough for the down payment and closing costs, but it is always a little scary to spend that much money.
  • Too Many Irons in the Fire– We already have a rental. We own half of a commercial building. We are involved with slower than slug speed partners in a house flip, and I’m about to sell the last part of my optometry practice at the end of the year. Maybe there is just too much going on to consider adding another piece to the puzzle right now.

Those are some of the pros and cons for expanding our real estate empire. I am really curious to see what positives and negatives you can come up with. 


About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.


  1. So it sounds like you’d be cash flow positive on it from the start, even using a property management firm to rent it out. With a clean inspection (ie that it doesn’t need much work) sounds like it could be a great addition to your little real estate empire!

    But what is the random structure that looks like it’s built in the driveway? =)

    • We have found a really good inspector. He charges about $400, but he is super thorough. I would not buy anything without his input.

      You can’t really tell from the picture, but that is actually a carport that doesn’t look too bad, although I’m not a fan of carports.

  2. I would finish up that house flip first, then I’d move forward with getting another rental. The positive cash flow can’t be beat. As long as you have enough cash behind you for emergencies and whatnot I’d do it.

    • If only the flip would flip. I’m to the point that if I never see another flip this house show, it will be too soon. I’m glad we cancelled satellite TV or I might be throwing things at the screen.

  3. Well, the cash flow looks pretty good on that one. However, you do have a lot of irons in the fire and your dollars going in several directions. Are there more properties that would be as cash flow positive as this one? I think that’s what I would use to decide.

    • When you start to scratch the surface, lots of other possibly houses seem to pop up. The realtor gave me a list of about ten places in our price range that could work. I am working my way down the list, but the one in the picture seems like the biggest hidden gem so far.

  4. Sounds like a great deal! We would certainly buy more if we had time to deal with them. I think you should go for it!

  5. I can understand how that would be a difficult choice. At first glance, I’d say no as it might be too many irons in the fire. That said, there are some very good reasons why you should. With the positive cash flow, the way rates are going, price reduction and getting you closer to your overall goal I’d be hard pressed to say no.

    • That’s kind of where I’m at. There are reasons for and against. I guess it comes down to finding a really good house at a really good price. Otherwise, we certainly won’t settle. We don’t have to do this right now.

  6. i’d say go for it..

    the interest rate situation is only going to get worse. if we had waited a few more months to buy our house (we bought earlier this year), we would have paid an extra $150 a month in interest alone.. Yikes!

  7. Sounds like you’ve got an awesome deal going on. If you’ve got the time to manage the property, why not go for it?

    • We would most likely use property management. It isn’t so much the time, but being in a really small town, I don’t want tenants showing up at my work or parents of my husband’s former students dealing with us for financial things. It would really suck to lose a patient who became my tenant because they though we were too slow fixing the stove or something like that.

  8. Looks like a pretty good deal. Even with a 50% vacancy you would at least be breaking even.

  9. Wow $90,000 for a 3 bedroom 2 bathroom house in a good location and good rental history. How much can you charge for rent? I don’t know anything about rental property but that sounds pretty good. I also don’t think mortgage rates will be going anywhere but up.

  10. I would suggest you look back at what your ultimate goal is. If it is financial freedom and you see rentals as your primary source for becoming financially free, then go for it, as long as you find an ideal rental.

  11. $1000pm rent on $90k or less property is pretty good from a yield (gross & net) and cashflow standpoint.

    Align the decision with your ultimate goals and compare to other asset classes, but these look like a pretty appealing deal from the first glance.

    • Real estate is a really good deal where we live if you have the cash to buy or at least put a good down payment in place. There will always be a big rental pool because it’s a very blue collar, lower social economic area. We also have lots of short time workers who come for a year or two to work in the oil fields.

  12. I would go for it. Interest rates are only going up. You can save money by getting it now. I understand the whole irons in the fire, but if you don’t pull the trigger, someone else will. Sometimes opportunity knocks early!

    • I don’t want to be one of those people who think so much that all the good deals pass them by. I also want to really weigh all the pros and cons. These comments are incredibly helpful.

  13. First of all I want to say thank you for the Breaking Bad reference! I’m a huge fan of the show and can’t wait to see how it all ends. I don’t know much about buying/investing in rental properties but it sure sounds like your pros outweigh your cons!

    • Wouldn’t you rent a place to Walt? We had two teachers who looked at our last rental, and I’m sure they are salt of the earth people, but I can’t help thinking they could be cooking meth on the side.

  14. I’ve never owned rental property so I no experience with the time it takes to manage it, but I am familiar with having lots of irons in the fire. From a financial perspective it seems overall very positive. Your financial situation is extremely good and rent potential is high. Honestly, as long as the house is ready to be rented minus a few touch-ups (nothing to the extreme of your house flip), I think you can add this without too much hassle. If it’s needs a lot of work, then I might keep looking.

  15. I’m so bad at answering stuff like this but it SEEMS like it’s a good deal despite some of the headaches that come along with it! I wish I could be more helpful! I’m so risk averse!

  16. I think it all depends on what cash reserves you have laying aside in savings and investments. Do you have the capital to back up another purchase should you need to do repairs or pay the entire mortgage payment because you can’t get it rented? Houses will always be available to purchase, there is no need to rush it. I’m currently sitting on three rentals and am waiting to purchase another one until I can save up the cash to pay for it. That may take some time but I’ve seen too many things go south in this business and I’m not willing to put myself at risk just to get another property. Slow and steady wins the race in my book.

    • Very good points. We have a good friend who has a ton of rentals he started accumulation 20+ years ago. He has bought in every decade, and I’ve seen from his history, that good houses come up during all types of economies. You just have to search harder sometimes. I think I will pursue it a bit more. I think the one I really like might go for a pretty good price. It’s been on the market forever.

  17. I think you should definitely go ahead get the property, especially since you’ve already gotten your feet wet in owning an investment property. You never know when another great deal like this will come along since the market is so unpredictable.

    • Thanks for offering your opinion. I do worry that all the good deals may be gone in another 6 months as real estate prices are starting to rise again in our area.

  18. Being a landlord is not easy, but you will be rewarded for all your work very well.Just buy well and do the front end work necessary to find a good tenant.

  19. You know what Kim. If you both think this is the right time and you can get the financing then go for it. When it comes to building wealth we have the final say.We’d like to purchase a rental as well one day. Good luck mate.

  20. I’m no real estate buff so I can’t help from that angle, but I would say there are a couple of things that seem to argue in favor of it here. One is that you say you’ve been eyeing this property for months, meaning this isn’t a spur-of-the-moment thing springing up purely from a low price. The second is that you say you could handle the mortgage payments without a problem even if you don’t have renters. As long as you also have enough of a cash cushion to handle this property, the other property, your flip and your regular income and expenses going through some tough times all together, then I think it sounds like a good opportunity.

    • Isn’t is a lot of if’s. I wish it was simple, but my life does not seem to always follow that path. I think I notice every for sale sign in the area we prefer to have rentals. When something goes on the market, I notice. I have always thought this house seemed better than most,but it seemed way overpriced. That’s how we got our first house. We jumped when the price dipped. We’ll see if this one gets snatched up before we make a decision or not.

  21. I don’t see many negatives considering you have investment debt not credit card debt and you are local so can take care of the property. How incredible that you have more taxes than mortgage. I’d go for it if I could afford it.

  22. Nice information about Rental Property.

  23. If I were you based on the rental income and costs you are discuss, I’d focus more on the online business side of things. Much less painful to manage with much more upside. And this is coming from someone who does both.

    It’s much easier to generate an extra $250-$500 a month online than to deal with rental property imo.


    • But I want it all! I’m always afraid the online income will go away because I feel like I have no idea what I’m doing most of the time. Maybe Fincon will teach me everything I need to know.

  24. A 1% increase in APR on a 30 year fixed mortgage equates to a 10.75% decrease in buying power.

    I wish I had the cash to purchase a rental property right now. It’s the time the rich get richer! I don’t know if we’ll ever see interest rates this low again.

    • We got our pre-approval from the bank today. I guess churning credit cards makes no difference if you still have a 770 credit score. I was amazed that the rates are already a point higher than they were a year ago, but still very low compared to years past.

  25. Good debt is never something to hate! I’d go for it if you can afford it!

  26. Having just sold a rental property, I’m not quite ready to jump back in, but I still love real estate in general. Generally speaking, though, anything that doesn’t cashflow at least $1,000/month is too tight for me. When you’re just cash-flowing a few hundred a month, you’re kidding yourself and will almost certainly be cashflow negative on a yearly basis. Good luck!

  27. We’re weighing the pros and cons of buying another rental property next year against opening a SEP IRA. It’s really hard to know what is best for us based on ever-changing info…

    • If you could only find a crystal ball that worked. I guess when we’re old and gray and have carpel tunnel from all this computer work, we can look back and figure out which way was the best.

  28. Looks like a great opportunity for you guys. If you have looked at it in different perspectives and have calculated and assessed your financial capabilities then why not? Go ahead with this decision it is after all an investment in the long run. As long as you’re secured with the cash flow I guess it shouldn’t be a problem.

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