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thelawnwranglers
LSU Fan
Oakland, NJ
Member since Sep 2007
27994 posts

How painful is rental property?
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?



Upperdecker
LSU Fan
St. George, LA
Member since Nov 2014
21845 posts

re: How painful is rental property?
Do people rent $400k houses?


LsuTool
USA Fan
COMIN’
Member since Oct 2009
30969 posts

re: How painful is rental property?
In NJ probably.

And if it’s in Oakland, 400k is a pretty average house. I live one town over.
This post was edited on 3/30 at 7:30 am


Cdawg
Houston Astros Fan
TigerFred's Living Room
Member since Sep 2003
53863 posts

re: How painful is rental property?
A lot of workers with families reassigned to jobs in different cities for 1-2 years.


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nugget
LSU Fan
Los Angeles, CA
Member since Dec 2009
9860 posts
 Online 

re: How painful is rental property?
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.


jimbeam
USA Fan
University of LSU
Member since Oct 2011
61297 posts
 Online 

re: How painful is rental property?
What are the rental comps?

quote:

Just thinking do you expect rental to be break even and asset appreciation is the goal or do you get both?
If it doesn’t cash flow it’s not an investment, it’s a gamble on appreciation
This post was edited on 3/30 at 8:38 am


The Spleen
Alabama Fan
Member since Dec 2010
28648 posts
 Online 

re: How painful is rental property?
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.


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bigblake
Member since Jun 2011
1933 posts

re: How painful is rental property?

This post was edited on 4/5 at 5:48 am


footballdude
LSU Fan
BR
Member since Sep 2010
423 posts
 Online 

re: How painful is rental property?
Well a lot of cites and states are enacting 30-60 day moratoriums banning evictions from rental properties.



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jimbeam
USA Fan
University of LSU
Member since Oct 2011
61297 posts
 Online 

re: How painful is rental property?
quote:

Selling a house is very expensive and averages around 8%. If you are buying an investment property you need to take this into account.
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.


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nugget
LSU Fan
Los Angeles, CA
Member since Dec 2009
9860 posts
 Online 

re: How painful is rental property?
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.


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StringedInstruments
Auburn Fan
Member since Oct 2013
11651 posts
 Online 

re: How painful is rental property?
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.


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thelawnwranglers
LSU Fan
Oakland, NJ
Member since Sep 2007
27994 posts

re: How painful is rental property?
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


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thelawnwranglers
LSU Fan
Oakland, NJ
Member since Sep 2007
27994 posts

re: How painful is rental property?
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


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thelawnwranglers
LSU Fan
Oakland, NJ
Member since Sep 2007
27994 posts

re: How painful is rental property?
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


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ColoradoAg03
Texas A&M Fan
Denver, CO
Member since Oct 2012
4772 posts

re: How painful is rental property?
quote:

Do people rent $400k houses?


Very much so in Denver.


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ninthward
LSU Fan
Summit County, CO
Member since May 2007
15296 posts

re: How painful is rental property?
quote:

Do people rent $400k houses?
In Colorado they do. But it plays out much like this.

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 at 10:32 am


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thelawnwranglers
LSU Fan
Oakland, NJ
Member since Sep 2007
27994 posts

re: How painful is rental property?
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 at 10:41 am


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LSUTOM07
LSU Fan
Baton Rouge
Member since Dec 2011
745 posts

re: How painful is rental property?
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?


thelawnwranglers
LSU Fan
Oakland, NJ
Member since Sep 2007
27994 posts

re: How painful is rental property?
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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