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Started By
Message
Investigating a potential a Rental Property
Posted on 4/4/18 at 2:48 pm
Posted on 4/4/18 at 2:48 pm
Never gotten into single family rental homes so I thought I would throw this out there and get the board's thoughts.
A 3BR house is on the market just down the street from me. It has been a rental for several years pulling in $1900. I know that some rentals in the area for comparable properties are pulling in around $2500. Current owners live out of town. Don't know any details about the house other than the listing. At first glance, I thought it was priced low for standard 3BR in the area then I noticed that the sq ft is much smaller. Kitchen and bath are in fair condition but could use some updating. Rest of the house appears to be in decent shape.
Just to give you some perspective, the RE market in my neighborhood is extremely competitive and a lot of smaller houses like this are being bought up only to be torn down for a larger home.
Think it's worth looking into? Outside of finding out if any major work is needed, what should I be looking out for? What's a good cap rate for residential single family?
A 3BR house is on the market just down the street from me. It has been a rental for several years pulling in $1900. I know that some rentals in the area for comparable properties are pulling in around $2500. Current owners live out of town. Don't know any details about the house other than the listing. At first glance, I thought it was priced low for standard 3BR in the area then I noticed that the sq ft is much smaller. Kitchen and bath are in fair condition but could use some updating. Rest of the house appears to be in decent shape.
Just to give you some perspective, the RE market in my neighborhood is extremely competitive and a lot of smaller houses like this are being bought up only to be torn down for a larger home.
Think it's worth looking into? Outside of finding out if any major work is needed, what should I be looking out for? What's a good cap rate for residential single family?
This post was edited on 4/4/18 at 3:00 pm
5
Posted on 4/4/18 at 2:54 pm to FairhopeTider
quote:
$1900
quote:
$2500
people that pay that in rent are nucking futs. i feel like i'm getting screwed paying $600 a month. that's why i'm currently in the market for a house of my own.
Posted on 4/4/18 at 3:05 pm to FairhopeTider
Are you a cash buyer? How long has it been on the market?
This post was edited on 4/4/18 at 3:06 pm
Posted on 4/4/18 at 3:08 pm to deeprig9
quote:
Are you a cash buyer?
Yes
quote:
How long has it been on the market?
Today
Posted on 4/4/18 at 3:29 pm to FairhopeTider
Whats the asking price. ballpark.
If you are going to pay cash and not refinance into some type of fixed rate loan product, you will automatically save yourself some money.
If you are going to pay cash and not refinance into some type of fixed rate loan product, you will automatically save yourself some money.
Posted on 4/4/18 at 3:32 pm to stevengtiger
quote:
Whats the asking price. ballpark.
$360,000
Posted on 4/4/18 at 3:46 pm to FairhopeTider
quote:
$360,000
Oh boy.
Personally, that is not enough rent to buy a $360K house. I know REI and pricing is different everywhere but those numbers would not work for me.
I don't say that to be discouraging but that is just out of my wheelhouse.
Posted on 4/4/18 at 3:58 pm to stevengtiger
quote:
Personally, that is not enough rent to buy a $360K house.
And that is certainly a factor. I know I could probably get a better return elsewhere when it comes cash flow and ROI. However, I'm also keeping my eye on probably selling the house in a few years considering the housing market in the area is in really good shape and will stay that way. The risk here is minimal and I can at least make sure the house is maintained because I'm right down the street.
quote:
I don't say that to be discouraging but that is just out of my wheelhouse.
No worries. Just kicking around the idea.
This post was edited on 4/4/18 at 4:01 pm
Posted on 4/4/18 at 4:02 pm to FairhopeTider
quote:
However, I'm also keeping my eye on probably selling the house in a few years considering the housing market in the area is in really good shape and will stay that way.
If you are in Fairhope, I have heard the market there is great and growing. If you can get it and keep it rented for a few years at $2K a month, I'm sure you can make a good return.
For me personally, that is just a large chunk of money counting on appreciation. Keep us posted on what you decide to do. Always enjoy reading others ventures into REI.
Posted on 4/4/18 at 4:22 pm to stevengtiger
That's really low rent compared to price. I'm guessing at that price though, the renters would be more stable as far as paying rent and not destroying the house. Your market may be good, bit personally Im not sure I would buy based on appreciation. I just don't know how long housing prices can keep going up like they are now, especially with rates rising. I'm definitely no expert though, just my opinion.
Posted on 4/4/18 at 4:32 pm to Mingo Was His NameO
quote:
I'm guessing at that price though, the renters would be more stable as far as paying rent and not destroying the house.
I know that a nearby house that is actually smaller and has comparable value recently was able to lock in a renter for a two year lease at $2600 due to the interest in renting it. I have no problem thinking the market is there.
Additionally, I'd like to get into a little more real estate investing and I figured this would be a good learning experience before getting into something a little more complex.
This post was edited on 4/4/18 at 4:35 pm
Posted on 4/4/18 at 4:54 pm to FairhopeTider
Only if you are 100% certain that the value is going to increase because ROI isn't enough with those numbers. I have several and although I purchase with cash I won't buy one that wouldn't cover taxes, insurance and the note if it was on a 15 year basis. Residential rentals are ok but they are not for everyone.
Posted on 4/4/18 at 6:13 pm to Marlbud
"...the housing market in the area is in really good shape and will stay that way"
Honestly, you have no way of knowing for sure.
Honestly, you have no way of knowing for sure.
Posted on 4/4/18 at 7:09 pm to FairhopeTider
You say the buyers are tearing down older houses to build new. This sounds alot like the popular Boulevard neighborhood in Athens where shitty old little houses command $2k+ in rent. Whenever one sells it is torn down and a 700k house built.
Do you think the lot is worth $350? Could you put a 250k house on it and sell for $750?
Do you think the lot is worth $350? Could you put a 250k house on it and sell for $750?
Posted on 4/4/18 at 8:23 pm to stevengtiger
yeah 1900 rent for 360k is bad rent to value ratio. also when you buy houses that expensive you are NOT buying for cashflow you are buying for appreciation. I can cashflow way better with a way less expensive property and also get a better COC return.
This post was edited on 4/4/18 at 8:32 pm
Posted on 4/5/18 at 12:30 am to Fat Bastard
Don't like that ROI. If you're a cash buyer in the $360 range, I'd consider financing commercial real estate. You'll have less headaches. Seeing as you live down the street, a lot less headaches.
Posted on 4/5/18 at 10:54 am to FairhopeTider
Even if you get $2500/month, that still seems low for $360k house. I've always been told about the 1% rule for buying rentals: that the monthly rent should be 1% of the total price for it to be a good rental investment.
Have you figured out the costs for insurance and property taxes (without homestead exemption)?
Have you figured out the costs for insurance and property taxes (without homestead exemption)?
Posted on 4/5/18 at 12:36 pm to finchmeister08
quote:
people that pay that in rent are nucking futs. i feel like i'm getting screwed paying $600 a month. that's why i'm currently in the market for a house of my own.
How old are you?
Middle class families with kids in school are going to pay that in rent easily.
This post was edited on 4/5/18 at 12:58 pm
Posted on 4/5/18 at 1:30 pm to StringedInstruments
quote:
How old are you?
28/On my own/no kids
Posted on 4/5/18 at 10:16 pm to FairhopeTider
Pick a cap rate...that sets price. Cap of 10 means that house should be priced between 228000 and 264000
So its a bad investment property as a rental.
With 360k cash, i would look for commercial opps or 16+ plexes....much less risky than single fam. Less headaxhes
So its a bad investment property as a rental.
With 360k cash, i would look for commercial opps or 16+ plexes....much less risky than single fam. Less headaxhes
This post was edited on 4/5/18 at 10:22 pm
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