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Rental properties
Posted on 5/25/15 at 3:29 am
Posted on 5/25/15 at 3:29 am
I'm currently researching the idea of owning a rental property. I was wondering at what gain I could be comfortable without stressing the small things including taxes and other fees. In the area I'm looking, properties go for around $1200-1500 month. Thank you in advance
4
Posted on 5/25/15 at 8:26 am to xxGEAUXxx
a general rule of thumb that I've heard is rent should be around 1.5-2% of the purchase price. Wish I had heard that before I bought my current rental haha.
Posted on 5/25/15 at 9:02 am to xxGEAUXxx
You probably don't want your payments to be more than $800/m for a 30 yr and $900/m for a 15yr. Look for homes with recent replacements of roof or ac
Posted on 5/25/15 at 11:19 am to Htown Tiger
Everybody is not getting that. yet still make killer Cashflow.
Posted on 5/25/15 at 11:59 am to Htown Tiger
quote:I don't know about Houston, but I could definitely live with 1% in Baton Rouge.
a general rule of thumb that I've heard is rent should be around 1.5-2% of the purchase price.
$1,000/month is about the average rate for a $100,000 condo unless it's extremely close to LSU.
Posted on 5/25/15 at 4:38 pm to theoldwiseone33
I've been looking at homes with newer roofs and were built recently. The fun part is trying to get a good deal
Posted on 5/25/15 at 4:43 pm to xxGEAUXxx
Wish I could find a deal in Houma. Moved here hoping to start this up and found out I am out of my depth at this point.
Posted on 5/25/15 at 5:39 pm to xxGEAUXxx
The 1% and 2% rule are helpful but not the holy grail. You need to set up a proforma and see what your profit could look like.
PGI (Potential Gross Income)
Subtract vacancy (I use 10% for my properties but real life is less than 3%)
This give you your EGI (Effective Gross Income)
From here we start deducting expenses
taxes
insurance
property management - even if you self manage your time is still worth something
repairs
capex
etc...
Real estate math is very easy but you need to know what your true expenses are. Talk to a successful landlord and read till your eyes hurt on biggerpockets.com.
PGI (Potential Gross Income)
Subtract vacancy (I use 10% for my properties but real life is less than 3%)
This give you your EGI (Effective Gross Income)
From here we start deducting expenses
taxes
insurance
property management - even if you self manage your time is still worth something
repairs
capex
etc...
Real estate math is very easy but you need to know what your true expenses are. Talk to a successful landlord and read till your eyes hurt on biggerpockets.com.
Posted on 5/25/15 at 5:44 pm to I Love Bama
After my expenses I am only making about $200 a month. I keep that set aside for repairs. Not making hardly anything right now but in several years will have them all paid off and be looking for a beach house lol.
Posted on 5/25/15 at 5:46 pm to secondandshort
What are you calculating for expenses? Let me your numbers and I might can help.
Posted on 5/25/15 at 6:11 pm to I Love Bama
The note, taxes and insurance right now. I set aside a little nest egg of 1k for when I need repairs. I don't pull any money out right now just keep adding to the 1k. When it gets big enough for a down payment I start looking for another house.
Posted on 5/25/15 at 6:31 pm to secondandshort
So rent minus the note, taxes and insurance is $200 per month?
Yikes. You may want to consider selling. If you have a month of vacancy or an appliance goes out, you are losing money.
Yikes. You may want to consider selling. If you have a month of vacancy or an appliance goes out, you are losing money.
Posted on 5/25/15 at 7:12 pm to I Love Bama
Well it's really 400 after looking back over it. I have a partner that I "split" it with even though we don't take profits. I'm looking at this for the long term. I've got money to put into it with a vacancy or repairs. I've expected it. They provide all appliances except stove and ac. I knew that going in with a ten year note that I may have to come out of pocket. Three years in and haven't had to yet. At this point I've managed to save up.
Posted on 5/25/15 at 7:56 pm to I Love Bama
If you don't mind I'll run some numbers by you. Let's say if I get a home with a mortgage that is $900 and I'm able to get $1300 in rent. So a gain of $400 what would be the total amount of taxes and such I could expect. I plan on taking 40-60% from the gain and putting that in an account for future problems and hopefully adding money for another home. Would it be safe to assume that about 50% would be taken out of the $400? Thanks in advance
Posted on 5/25/15 at 8:03 pm to xxGEAUXxx
That would make me nervous if I didn't have some back up money. That's similar to what I have with one of my houses but I've always been prepared to go into my savings to take care of a months mortgage or appliance issues. My advice would be to make sure you have a safety net if an ac goes out or you have to replace a roof. The way I justify it is I don't mind a zero take home money right now.
Posted on 5/25/15 at 8:16 pm to secondandshort
I think where a lot of people get into trouble is expecting to make a ton of money up front. I fully expect it to take some time before I see profit. My big thing is not only figuring out what to expect from paying bills but also how to start up a lease. A fiend of mine goes through a management company and just pays them $75 a monthv. They handle all the contracts, maintenance, and evictions.
Posted on 5/25/15 at 8:18 pm to I Love Bama
quote:
If you have a month of vacancy or an appliance goes out, you are losing money.
he will just have to save 6 months worth of payments for vacancies and maintenance. 200 PCF monthly is the bare MINIMUM i would do for a SMALL home with financing in a DOWN market!
Right now? HELL NO! My bare minimums right now are almost double that.
Posted on 5/25/15 at 8:27 pm to xxGEAUXxx
Very true. I live close enough to mine and they rent really easily so I don't deal with a mgmt company now. If I can get up to about 6-7 properties I may be looking for a mgmt co. I got a lease from a friend who has a real estate co. I deal with the headaches of getting the phone calls as well. The mgmt companies I've talked to charge approx the first month rent and 10% of the rent after. I'm just not ready to part with that money just yet.
Posted on 5/25/15 at 8:35 pm to jmarto1
It can be done in Houma, you just need a fixer upper right downtown.
Posted on 5/25/15 at 9:13 pm to eng08
I know it can be done, it's just finding the right deal. Downtown is the place for that. You've got a bunch of people thinking their property is worthy more than it is though.
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