I want to buy small properties, and set it up for furnished living for travel medical professionals in these small towns without much opportunities of places to stay.
If you could realistically get $1,200 a month for a furnished 2 bedroom duplex or small house, what amount of investment should I try to stay under? Like…how much could I pay and make a profit,
I am going to give you some VERY ROUGH numbers to use as a template. But remember that every deal is different and depending on several variables, your needs and numbers could be very different.
BUT, you generally want to hit a range of .75-1.0 to your purchase price every month for a return. What I mean is this:
If you find a property for $300,000, you need to have a MONTHLY RENT RATE of $2250 (300,000x.75%) to $3000 (300,000x1.0%), or higher.
Again, this is a general rule of thumb for a beginning investor looking at single property or duplex style property. Things change when you go over 4doors on a single property.
Your profit is depending on so many factors that I would suggest you and I set up a live phone call so I can give you a more thorough explanation. If you ever want to do that, shoot me a PM and we can arrange that. I could write a 20 paragraph response on what it takes and how you become profitable and it would just be too long.
Profit is up to you and how you measure it. If you consider profit the difference between your mortgage and your rent payment, that is one metric. But if you consider profit the difference between your investment, ongoing expenses, and incoming cash, then that is a very different number.
On an investment property right now you are looking at a likely mortgage cost of about 8% mortgage (many lenders charge at least 1 point higher than standard mortgage rate for investments). So at 8% you will be paying 7.34 per 1000 borrowed, not including taxes.
So let's do some math. On a $300,000 property you will need 25% down for investment (very typical requirement for novice investors), so that puts you at a mortgage of $225,000. So you will have $225 thousands to borrow. Or $225 x $7.34 for mortgage. That gives you a raw mortgage of $1651.50. If you are in a reasonable tax area of $4000/yr, that adds another $333 per month for a total of $1984.50.
Your rental at $1200 will be a loss of $784.50/mo (not counting any other fees, HOA/condo charges, etc)
If we guesstimate $4000/yr in taxes ($333/mo) and we use your $1200 as the number to work with (1200-333 = $867) then you need to have a mortgage NO HIGHER than ($834 divided by $7.34=$118) $118,000 or a total of $157,333 when you factor you are putting 25% down up front. ($118,000/75%). Even at that number, you are in a relative breakeven with rent to expenses.
I hope that makes sense and I am very very sorry for being so long winded. I just wanted to give you as much information as possible given the question.