RENTAL PROPERTY Question
I'm looking into several different properties for the possibility of using them as rental incomes. 1 pontential property is a duplex priced at $155,000.00 I should be able to get about $550.00 a month from each unit, taxes are about $1,600.00 a year.. whats your opinions on whether this is a good investment or not.
Thanks,
Mike
To me it sounds like it would be tough to generate much cashflow with those numbers. Say you were to get 100% financing for the 155,000 at 6% for a 30 year mortgage. That would be $928 a month just for principal and interest. If you are only going to be pulling in 1100 a month you might not be able to cover your expenses when you facture in taxes, insurance and reserves, etc. Thats not to say it wouldn't work with some creative financing, like if the seller was to carry back part of their equity with favorable rate/terms.
A general rule I like to use is my rents should be equal to 1% of the price. So in your case, I would like to be getting rents at $1550/mo, or $775/unit.
Don't forget you will have vacancy, clean up, and general maintenance and repirs that you will be responsible for through out the year. You don't want to cut it too close.
Those numbers would be tough in North NJ!!
Many two fam and 3 fam homes go for about 230-250+ avg rents in those areas are 750-1k. I was sorta looking from a + cash flow and exit strat regardless of price.
64Ford
Using your formula gives a good idea of property value/ overvalue as well. Using your figures rentals in SoCal going for say 750 are selling for 130,000. [ Edited by 3qu1ty on Date 10/15/2003 ]
If rent doesn't cover mortgage, the market is overvalued. You can buy for appreciation, but that is uncertain, it is like buying internet stocks in 1999, hoping for a bigger fool to buy from you. I would look for investment opportunities, other than straight RE in those markets with housing "bubbles". I hope I don't sound too pessimistic.
You can find better deals then that,
and don't forget property and liability insurance.You need more cash flow then that.
RK
I agree w/64Ford here. I tend to go by the 1% rule. Then I look at the detailed numbers to see if I can really pull it off. If the numbers break even, then I buy. I'm only then 1 rent raise away from a positive cash flow. Its a buy and hold stratagy from that point out.
Quote:
On 2003-10-13 16:12, 64Ford wrote:
A general rule I like to use is my rents should be equal to 1% of the price. So in your case, I would like to be getting rents at $1550/mo, or $775/unit.
Don't forget you will have vacancy, clean up, and general maintenance and repirs that you will be responsible for through out the year. You don't want to cut it too close.
[addsig]