Arksansas - Where it's a crime to not pay rent.

[videogamesrock]

Remember, renting that same house would run you $1050 a month instead of the $500 a month through ownership.

If you think that it's hard to qualify for a mortgage making $16k/yr, imagine trying to qualify for one on a rental property for that amount.  You'd need a larger down payment (typically 20%) and great credit - which I doubt someone who makes $16k has.

Your scenario just keeps getting worse.

It's easier to qualify for the mortgage than a rental property at that income rate.  Lenders only require a 35-45% income above the commitments.  You're getting too hung up with the dollar amount.  

In this case, to qualify for the $1000 rent it would need two renters as the landlord requires a 3 times income to payment ratio.  

My tenants are usually 2+ people.

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This is an $80k house in Little Rock for rent for $700.

https://www.zillow.com/homedetails/19-Al...1425_zpid/

The price probably reflects the interior of the house and condition.  I get warry when the LL doesn't post pictures with it.  

Attached is a Little Rock home that we are looking at buying.  The price is $107k which is slightly high by about 7k, but it was recently rehabbed, so it does have a new AC, furnace, hot water heater, HVAC system.  I've also included the proforma too in case you were interested.  Homes with these upgrades and that are recently updated will generally command a rent that is 1% per month of the entire value of the home.  This is why investing in places like Little Rock is fantastic, and your tenants will always make 3 times the rent amount.  But it would be more advantageous to buy it yourself vs becoming a renter.  

My recommendation is that someone who is sixteen should get an $8 an hour job, work 15 hours a week for the three years in high school, then have enough for a DP.  ($18,720) that type of economic freedom won't be available in places like CA.  

Now before you, nitpick the proforma I've attached.  You can have the seller pay for the closing costs which is common, the DP is 25% not 20% in the example, and origination fees are also negotiable.

Another great option for the 18-year-old who makes 16k a year is to buy this as a rental ($8x40hrs).  The lender will take into consideration in the loan application 75% of the income the rental will generate as additional income before they even own it.  So your 16k annual income plus 75% of $995 makes your application income  $24,995. 
Using that 75% formula that 18-year-old can literally ride that rent income as additional income for up to ten financed properties.  

Also, view the ten-year projection on this rental, you'll see how annual rent increases will increase monthly income giving you more to reinvest in even more properties.  


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This discussion has been very helpful as I do have a meeting with a California and a Washington investor who is going 1/3 on this house or a similar house next week.  The questions and conversations we are going to have will be very similar to what we had here.