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How to get into rental property?
Posted on 3/19/23 at 9:27 am
Posted on 3/19/23 at 9:27 am
Is there some type of formula or margin when calculating payments and then rent?
5
Posted on 3/19/23 at 9:41 am to Silverback911
quote:
Is there some type of formula or margin when calculating payments and then rent?
When I was starting I used the 2% rule and crushed it. Any IQ can comprehend this and be successful.
In this market, I think you will be using the 1% rule.
For example, take your ALL in cost (every dollar you spend to purchase and get the house ready to rent) and multiple that by 2%. That is the price you have to rent it for.
If the market does not support that price, it's not a good investment.
This is a fool proof way for a beginner to get started and be successful.
2% deals are impossible to find now.
Posted on 3/19/23 at 10:01 am to I Love Bama
Is going 1% even worth it?
Posted on 3/19/23 at 10:57 am to I Love Bama
Can you give an example of the two percent rule? For example, payment, insurance, and property taxes are 1k monthly, does this mean I charge $1,200 a month?
Posted on 3/19/23 at 10:59 am to Silverback911
The 2% rules means if you buy a property for $100k, you charge $2,000/mo rent.
Posted on 3/19/23 at 11:03 am to I Love Bama
2% rule is an amazing deal. Usually for a bad part of town. 1.5% is on the money in this market. 1% is tight in this market!
But I can’t agree with Bama more!
I started last year and am going to try to retire in 10-15 years
But I can’t agree with Bama more!
I started last year and am going to try to retire in 10-15 years
Posted on 3/19/23 at 11:12 am to PhiTiger1764
Thanks everyone.
Posted on 3/19/23 at 11:33 am to Silverback911
quote:
Is going 1% even worth it?
It can be. It's not fool proof like 2%. There are variables to consider that you don't have to consider with the 2% rule.
Taxes
Landlord laws
Type of tenant you can get
Chances of appreciation
This is just a few things you have to consider when buying at 1%.
I would not recommend using 1% for a newbie.
Posted on 3/19/23 at 12:00 pm to Silverback911
Where you can approach the 2% in these markets are multiplexes in less than ideal parts of town.
Now, they might be occupied and you might not be getting 2% up front but as you change tenants and upgrade units you should be able to get 2% on a not ideal area of town.
If you are renting a higher end place to higher end tenants getting 2% isn't as crucial as you will probably see better appreciation over time.
My biggest deal is can the property pay for itself. Getting into a 4 plex at first might sound like more work but you have 4 doors to pay for the building. If 1 door is vacant for a couple of months 3 are bringing in money. If you have a higher end property that might bring in the same rent but it is vacant you have nothing to help pay for the vacancy.
Now, they might be occupied and you might not be getting 2% up front but as you change tenants and upgrade units you should be able to get 2% on a not ideal area of town.
If you are renting a higher end place to higher end tenants getting 2% isn't as crucial as you will probably see better appreciation over time.
My biggest deal is can the property pay for itself. Getting into a 4 plex at first might sound like more work but you have 4 doors to pay for the building. If 1 door is vacant for a couple of months 3 are bringing in money. If you have a higher end property that might bring in the same rent but it is vacant you have nothing to help pay for the vacancy.
Posted on 3/20/23 at 8:36 am to armsdealer
quote:
Where you can approach the 2% in these markets are multiplexes in less than ideal parts of town.
This is spot on. Just purchased a quadplex in a terrible part of town. Each door is rented for $600. PUrchase price was $110k, financed $85k.
2.18% of purchase price
2.82% of finance amount
Posted on 3/20/23 at 8:42 am to ThatsAFactJack
quote:
2.18% of purchase price
2.82% of finance amount
In this environment, you did great!
Have you looked at section 8 rents in this area? I bet they are much more than $600 a door
Posted on 3/20/23 at 8:45 am to ThatsAFactJack
Are y’all doin turnkey type deals or actually scoping out your area and finding properties? I like the idea of buying in better landlord friendly states and having PMs do everything. I’m relatively new as well. Just got my first property last December
Posted on 3/20/23 at 8:48 am to I Love Bama
Bama I’ve read your posts sporadically through the years.
I’m assuming you didn’t care about a property appreciating. More so wanted low cost housing (usually in C or D rated neighborhoods) for higher % rents. If this is the case, how did it work out? When you sold them all did many appreciate at all? I’m thinking you sold everything right after covid when prices were crazy high
I’m assuming you didn’t care about a property appreciating. More so wanted low cost housing (usually in C or D rated neighborhoods) for higher % rents. If this is the case, how did it work out? When you sold them all did many appreciate at all? I’m thinking you sold everything right after covid when prices were crazy high
Posted on 3/20/23 at 8:52 am to TigerMan327
Yes, I am almost out of the game entirely. I have 4 houses left but I am owner financing 2 of them and one is tied up in a lawsuit.
All my properties saw great appreciation but that was not my strategy. It was just a cherry on top.
I have never cared about appreciation and think it is foolish to rely on that when investing. Property values can go up and down while rental rates stay stable/increase over time.
All my properties saw great appreciation but that was not my strategy. It was just a cherry on top.
I have never cared about appreciation and think it is foolish to rely on that when investing. Property values can go up and down while rental rates stay stable/increase over time.
Posted on 3/20/23 at 9:33 am to Silverback911
One way is to buy clunkers with a plan to build ADUs on the same lot.
Posted on 3/20/23 at 9:35 am to I Love Bama
Do you mind sharing your email? I would like to pick your brain on a few things.
Posted on 3/20/23 at 9:37 am to TigerMan327
quote:
Are y’all doin turnkey type deals or actually scoping out your area and finding properties? I like the idea of buying in better landlord friendly states and having PMs do everything. I’m relatively new as well. Just got my first property last December
I think most people that are into rental properties aren't making their money on turnkey properties. Each market is different, but overall, turnkey properties do not have a good cash flow, especially if you use a PM to manage something that's brand new.
Posted on 3/20/23 at 9:39 am to ThatsAFactJack
Who collects the rent or manages the property?
Posted on 3/20/23 at 9:47 am to lynxcat
A property manager. They take 8% of total rent.
Posted on 3/20/23 at 9:49 am to MrJimBeam
Turnkey rental doesn’t mean the property is brand new. I’d assume most guys heavy in rentals have PMs. Not many people wanna manage 10+ properties on their own.
With turnkeys you lose out on some money when you buy but the rents are still there.
With turnkeys you lose out on some money when you buy but the rents are still there.
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