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Message
How painful is rental property?
Posted on 3/29/20 at 11:07 pm
Posted on 3/29/20 at 11:07 pm
I have my first house about to go on market. My new house I own outright.
Paid $435 hopefully worth $395-385 note $290
I am wondering if keeping it as a rental makes sense.
I think sale it just from a stand point of people running from NJ like the plague and real estate tax of $10k.
Also house could use some work/maintenance updated bathroom, and roof.
Flip side if economy is bad might be more renters. Interest rate is low though. So wondering if I have better buyers.
Just thinking do you expect rental to be break even and asset appreciation is the goal or do you get both?
Paid $435 hopefully worth $395-385 note $290
I am wondering if keeping it as a rental makes sense.
I think sale it just from a stand point of people running from NJ like the plague and real estate tax of $10k.
Also house could use some work/maintenance updated bathroom, and roof.
Flip side if economy is bad might be more renters. Interest rate is low though. So wondering if I have better buyers.
Just thinking do you expect rental to be break even and asset appreciation is the goal or do you get both?
7
Posted on 3/30/20 at 5:59 am to thelawnwranglers
Do people rent $400k houses?
Posted on 3/30/20 at 7:28 am to Upperdecker
In NJ probably.
And if it’s in Oakland, 400k is a pretty average house. I live one town over.
And if it’s in Oakland, 400k is a pretty average house. I live one town over.
This post was edited on 3/30/20 at 7:30 am
Posted on 3/30/20 at 7:38 am to Upperdecker
A lot of workers with families reassigned to jobs in different cities for 1-2 years.
Posted on 3/30/20 at 8:22 am to thelawnwranglers
quote:
Just thinking do you expect rental to be break even and asset appreciation is the goal or do you get both?
To answer this question, cash flow is king. I’d hate to bank on the appreciation of the property.
Just know that what makes a nice home to live in doesn’t necessarily make a nice home to rent. My rule of thumb when looking at rentals is the 1% rule. If it doesn’t pass the 1% rule, I don’t even consider it. That rule is will I get 1% of the purchase price (or in your case what you could sell it for) in rent. If the answer to that question is no, run. I’m not saying people can’t make money on sub 1%, but it’s very difficult and you better be seasoned.
Posted on 3/30/20 at 8:36 am to thelawnwranglers
What are the rental comps?
quote:If it doesn’t cash flow it’s not an investment, it’s a gamble on appreciation
Just thinking do you expect rental to be break even and asset appreciation is the goal or do you get both?
This post was edited on 3/30/20 at 8:38 am
Posted on 3/30/20 at 8:49 am to thelawnwranglers
Rentals to me is all about cash flow. The general ratio I would look for is 2:1 as far as income to expenses. So if market rent is $1000, I'd want my monthly expenses around $500. I don't think that's a hard set rule anywhere, just my preference.
I get the investment side of it, and that is always in the back of my mind. I only have one rental right now, and no real desire to add any more. There is no mortgage on it, so the cash flow is really great on it. It's not in a great rental market, but I've had a great tenant the past year, and for me that adds value. She takes good care of the place, never complains, never late on payment, very accommodating if I need to get in the house to do any work, quick to report any potential maintenance issues, etc.
I get the investment side of it, and that is always in the back of my mind. I only have one rental right now, and no real desire to add any more. There is no mortgage on it, so the cash flow is really great on it. It's not in a great rental market, but I've had a great tenant the past year, and for me that adds value. She takes good care of the place, never complains, never late on payment, very accommodating if I need to get in the house to do any work, quick to report any potential maintenance issues, etc.
Posted on 3/30/20 at 8:49 am to thelawnwranglers
This post was edited on 4/5/20 at 5:48 am
Posted on 3/30/20 at 8:51 am to thelawnwranglers
(no message)
This post was edited on 1/11/21 at 1:55 pm
Posted on 3/30/20 at 9:22 am to bigblake
quote:Yep. 6-8% of selling works out to a pretty high number. Holding old primary residences as rentals makes a lot more sense when you factor this in.
Selling a house is very expensive and averages around 8%. If you are buying an investment property you need to take this into account.
Posted on 3/30/20 at 9:59 am to bigblake
You can get 1% in good markets in pretty good spots. You’re not going to find this on “a” properties on the MLS, but with small multi family and off market deals, you should be able to find these deals.
I’m not sure about Jersey, but in LA and TX, it’s extremely easy to sell and buy real estate. You just need a buy sell agreement and a good title attorney. I’ve used a RE agent one time and it was a cluster. All other properties I’ve sold or bought have been by myself and they went much more smoothly. I’m also able to negotiate a more favorable price because of not using an agent.
I’m not sure about Jersey, but in LA and TX, it’s extremely easy to sell and buy real estate. You just need a buy sell agreement and a good title attorney. I’ve used a RE agent one time and it was a cluster. All other properties I’ve sold or bought have been by myself and they went much more smoothly. I’m also able to negotiate a more favorable price because of not using an agent.
Posted on 3/30/20 at 10:20 am to thelawnwranglers
I fricking hated it and it sapped me of money in the short term with maintenance and taxes. Depreciation recapture killed any hope of profit but I did sell awfully quickly after being a landlord for about five years.
My advice is to make sure your cash flow is large and that you have some spare cash for unexpected maintenance. I had $8000 worth of new a/c units the first couple of years. People will say “tax write off!” But no tax write off refilled my savings account when that much money disappeared.
My advice is to make sure your cash flow is large and that you have some spare cash for unexpected maintenance. I had $8000 worth of new a/c units the first couple of years. People will say “tax write off!” But no tax write off refilled my savings account when that much money disappeared.
Posted on 3/30/20 at 10:23 am to LsuTool
quote:
And if it’s in Oakland, 400k is a pretty average house. I live one town over.
Yeah 1950s 3 br 1.5 bath -1,500 sq ft house
Avg or below avg
Posted on 3/30/20 at 10:25 am to nugget
quote:
I’m not saying people can’t make money on sub 1%, but it’s very difficult and you better be seasoned.
Thanks - I don't meant rule and not seasoned
Posted on 3/30/20 at 10:26 am to jimbeam
quote:
If it doesn’t cash flow it’s not an investment, it’s a gamble on appreciation
If it is cash flow neutral I am building equity absent asset appreciation
That said really good advice because that is a gamble
Posted on 3/30/20 at 10:26 am to Upperdecker
quote:
Do people rent $400k houses?
Very much so in Denver.
Posted on 3/30/20 at 10:30 am to Upperdecker
quote:In Colorado they do. But it plays out much like this.
Do people rent $400k houses?
Home value ( not inflated ) 250k + Colorado demand = 460k
I think the rental market here will take a hit, a lot of people were forced to move here overnight, and it takes a good chunk of change to move into a home here. So with little demand, we may see a rental surplus here for the first time in a long time.
This post was edited on 3/30/20 at 10:32 am
Posted on 3/30/20 at 10:40 am to jimbeam
quote:
What are the rental comps?
Looking and it is maybe $100-$300 over note
Thinking cashflow isn't there
This post was edited on 3/30/20 at 10:41 am
Posted on 3/30/20 at 10:41 am to jimbeam
quote:
If it doesn’t cash flow it’s not an investment, it’s a gamble on appreciation
Is paying down principal not taking into consideration towards ROI even if housing price does not appreciate?
Posted on 3/30/20 at 11:02 am to LSUTOM07
quote:
Is paying down principal not taking into consideration towards ROI even if housing price does not appreciate?
Would be curious OPs opinion, but I am reading it as it is still a risk and gamble on house pricing. Aka it might depreciate and paying down of principal could still result in less equity/net worth.
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