I agree with the last post by Spear.
fondu, have you looked at the real value of your return on equity after you take into account the time spent, other costs involved including any maintenance or repair costs or the fact that you have to pay tax on the rental income.
1)It seems to me that 5% gross return for the effort involved is poor to none. Could you do better if the properties were sold and the proceeds invested safe and secure without volatility
It seems to me that 5% gross return for the effort involved is poor to none.
If you are working - ask yourself - can you truly be the landlord dealing with all or any of the issues on the current properties?
2)Although holding onto the two properties should give you a nice capital gain should the housing market ever turn around - or maybe it will keep on sinking lower, thus reducing your capital valuation.
3)On the basis of your OP and that you can show 100% that you own the current two properties outright (no partners or co-owners), then simply get a written valuation on the properties, draw up a small business plan, a one-two pager showing capital equity that you have (houses plus anything else), income and expenses. Add to that that you are employed (even on a contract) show this income and any copies of cashed cheques. Have all the paperwork back up to show what you have put in the statement of equity, liabilities, income, expenses and cash flow.
The result should be positive equity and cash flow that a bank manger will understand that you are easily able to pay a 50k loan.
4)I would suggest that you go to at least three banks or a mortgage broker with this info and ask them for a home loan using the properties as equity plus how you have income from employment as well as the houses and what you will be doing with the money.
5)On the basis the 125k mentioned in your OP is still available to use as payment towards to new purchase, what is your real ability without working to be able to service (pay the total interest) on the debt without having to worry also that any of the income stream will not change ever. A lender will want your answer to this question
Try to look at your question as though you are the person handing over 50k to someone else - would you feel safe and secure that the 50k + interest is going to be paid back to you.
6)In a perfect world where nothing goes off the rails your expectations maybe OK, however think about 'what-if' any of the properties are vacant, or are not paying rent. Will there be any costly major repairs, roofs, plumbing, electrical etc which can happen - even if you are unemployed ... will this effect your ability to pay the loans?
7)Without working you have mentioned in your OP the real gross income is only 20k/year - less property expenses, personal expenses, living costs and going out - you are probably close to 10k -12k net income. Can that pay back the loan, with out considering any net income from the third property?
8)Last point - is there a family member or anyone else that would co-sign the 50k loan?
Good luck to you