Author Topic: Single Family Home as a Rental?  (Read 1014 times)

Fishindude

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Single Family Home as a Rental?
« on: September 07, 2017, 09:39:22 AM »
Give me your thoughts on this one.  Have an opportunity to purchase a 2 BR single family home w/ 2 car garage two doors from me for approx. $45,000.
It's a modular on 2 acre plot which adjoins our farm and has seen numerous owners and renters come and go over the years, some who have not kept the place in very good shape.   Considering purchasing this as a rental to control who my neighbors are, what the place looks like, and as an investment.

Here is the math:
Could probably buy for $45,000 cash, no loan.
Looks like it's ready to rent , cleaned up with very little needed presently.
For safety factor, figure I need to throw another $3,000 in upgrades making total $48K.
Taxes would run +/- $1500 annually.
Insurance $400
Mowing (25) times @ $50 = $1,250
Snow removal +/- $300
Total annual expenses = $3,450

Pretty sure I could easily rent for $750 / month grossing $9,000 and netting $5,550
That's about 11.5% return on $48K
** Understood I will have occasional large expenses like a furnace or roof down the road at some point that could cut into this.

Thoughts?
Worth the time and effort?










Cwadda

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Re: Single Family Home as a Rental?
« Reply #1 on: September 07, 2017, 10:25:09 AM »
You're not accounting for a repair budget and capital expenditures. Still looks to be a solid deal, however. It's convenient you live next door as well. As long as you're planning to live there for a while, I'd say go for it.

Bobberth

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Re: Single Family Home as a Rental?
« Reply #2 on: September 07, 2017, 03:47:14 PM »
50% rule says half of the rent received will go to expenses. Using that as an estimate, you'll have $375 left over after expenses. That's $4500/year. Not a bad 10% cash on cash return. Factor in that you will be choosing your neighbors, I would say it is definitely worthwhile to look into.

A question though, since this is a house, why not require the tenants to mow and remove snow? Save cash and hassle. That's the best thing I've done with my SFHs.

Slow2FIRE

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Re: Single Family Home as a Rental?
« Reply #3 on: September 07, 2017, 08:25:56 PM »
I have an upscale rental SFH ($3350/month).  Renters shovel their own snow and mow the lawn themselves (upkeep requirements are in the lease).  I only pay out of my pocket to clear the sprinklers in the winter (can't risk them screwing that up).

marty998

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Re: Single Family Home as a Rental?
« Reply #4 on: September 08, 2017, 02:00:10 AM »
Numbers really need to be seen in the context of location. I would caution anyone advising if it's a good deal or not to think about everything we don't know...

- is the town growing or shrinking - employment / economic circumstances
- level of crime, amenity, quality of tenant
- whether major infrastructure is planned for the area

I doubt anyone is going to know these answers for sure apart from Fishindude himself.

Good luck anyway to you - I can only dream of purchasing real estate at those prices *wipes away tears at Sydney prices*

MommyCake

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Re: Single Family Home as a Rental?
« Reply #5 on: September 08, 2017, 04:18:35 AM »
Lol Marty, I'll shed a tear with you.... 45k for a house in good condition with a 2 car garage on 2 acres?  Not in northern NJ that's for sure.

Many people use the 1% to determine if a property is a good investment.  Using that rule, you would need to get $900/mo rent to make this worthwhile.  Also as others mentioned, you will need to factor repair expenses into your budget, as well as potential vacancies. 

However, my personal opinion, is go for it.  The price is so low that you don't need a loan, making it less of a risk (in my opinion) and living so close makes it a more attractive deal for the personal reasons you gave and also because you won't have to travel at all to oversee things.  I would buy it.

Cwadda

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Re: Single Family Home as a Rental?
« Reply #6 on: September 08, 2017, 07:35:47 AM »
50% rule says half of the rent received will go to expenses. Using that as an estimate, you'll have $375 left over after expenses. That's $4500/year. Not a bad 10% cash on cash return. Factor in that you will be choosing your neighbors, I would say it is definitely worthwhile to look into.

A question though, since this is a house, why not require the tenants to mow and remove snow? Save cash and hassle. That's the best thing I've done with my SFHs.

I have an upscale rental SFH ($3350/month).  Renters shovel their own snow and mow the lawn themselves (upkeep requirements are in the lease).  I only pay out of my pocket to clear the sprinklers in the winter (can't risk them screwing that up).

Do you folks worry about the liability of letting tenants do the work?

Fishindude

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Re: Single Family Home as a Rental?
« Reply #7 on: September 08, 2017, 07:42:54 AM »
A question though, since this is a house, why not require the tenants to mow and remove snow? Save cash and hassle. That's the best thing I've done with my SFHs.

One of the reasons I am considering this purchase is to assure that a home right down the road is kept up and continues to stay looking nice.
My thinking was to include mowing and snow removal to assure that the place is kept up to my standards.  Also, opens it up to more renters, as some may not own a riding mower, weed eater, etc. and wouldn't want to purchase one, and / or just don't want to maintain a big yard. 

Landlords - What are your thoughts on pets.  My thinking is no inside cats or dogs, and outdoor pets must be kept on a leash or contained within fenced yard area.


Cwadda

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Re: Single Family Home as a Rental?
« Reply #8 on: September 08, 2017, 10:25:37 AM »
A question though, since this is a house, why not require the tenants to mow and remove snow? Save cash and hassle. That's the best thing I've done with my SFHs.

One of the reasons I am considering this purchase is to assure that a home right down the road is kept up and continues to stay looking nice.
My thinking was to include mowing and snow removal to assure that the place is kept up to my standards.  Also, opens it up to more renters, as some may not own a riding mower, weed eater, etc. and wouldn't want to purchase one, and / or just don't want to maintain a big yard. 

Landlords - What are your thoughts on pets.  My thinking is no inside cats or dogs, and outdoor pets must be kept on a leash or contained within fenced yard area.

My multi family property is strictly no pets. They tear up the place, and I want all tenants to be held to the same standard (either everyone is allowed pets, or no one).

Slow2FIRE

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Re: Single Family Home as a Rental?
« Reply #9 on: September 08, 2017, 10:38:38 AM »
50% rule says half of the rent received will go to expenses. Using that as an estimate, you'll have $375 left over after expenses. That's $4500/year. Not a bad 10% cash on cash return. Factor in that you will be choosing your neighbors, I would say it is definitely worthwhile to look into.

A question though, since this is a house, why not require the tenants to mow and remove snow? Save cash and hassle. That's the best thing I've done with my SFHs.

I have an upscale rental SFH ($3350/month).  Renters shovel their own snow and mow the lawn themselves (upkeep requirements are in the lease).  I only pay out of my pocket to clear the sprinklers in the winter (can't risk them screwing that up).

Do you folks worry about the liability of letting tenants do the work?

No.

Umbrella policy + liability policy on the rental = approx 1.5 million.

Not sure how successful the tenant would be in court against the insurance company's attorneys if they throw out their back shoveling snow.  I'm sure I wouldn't be able to sue the town and/or HOA for making me shovel snow if I still lived there.

If they trip on a crack in the sidewalk, they should have told us about the crack so we could get it repaired.

Cwadda

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Re: Single Family Home as a Rental?
« Reply #10 on: September 08, 2017, 12:08:23 PM »
50% rule says half of the rent received will go to expenses. Using that as an estimate, you'll have $375 left over after expenses. That's $4500/year. Not a bad 10% cash on cash return. Factor in that you will be choosing your neighbors, I would say it is definitely worthwhile to look into.

A question though, since this is a house, why not require the tenants to mow and remove snow? Save cash and hassle. That's the best thing I've done with my SFHs.

I have an upscale rental SFH ($3350/month).  Renters shovel their own snow and mow the lawn themselves (upkeep requirements are in the lease).  I only pay out of my pocket to clear the sprinklers in the winter (can't risk them screwing that up).

Do you folks worry about the liability of letting tenants do the work?

No.

Umbrella policy + liability policy on the rental = approx 1.5 million.

Not sure how successful the tenant would be in court against the insurance company's attorneys if they throw out their back shoveling snow.  I'm sure I wouldn't be able to sue the town and/or HOA for making me shovel snow if I still lived there.

If they trip on a crack in the sidewalk, they should have told us about the crack so we could get it repaired.

Good points. Thanks for this. I'm considering getting a policy next year. For now, I live on my property and do all the maintenance myself, so liability is not really an issue.

Drifterrider

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Re: Single Family Home as a Rental?
« Reply #11 on: September 11, 2017, 12:48:08 PM »
To the OP.

How easy/difficult is it in your market to get a tenant for a 2 bedroom house?  What is the market rent for the prospective property?

hucktard

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Re: Single Family Home as a Rental?
« Reply #12 on: September 12, 2017, 03:08:52 PM »
A question though, since this is a house, why not require the tenants to mow and remove snow? Save cash and hassle. That's the best thing I've done with my SFHs.

One of the reasons I am considering this purchase is to assure that a home right down the road is kept up and continues to stay looking nice.
My thinking was to include mowing and snow removal to assure that the place is kept up to my standards.  Also, opens it up to more renters, as some may not own a riding mower, weed eater, etc. and wouldn't want to purchase one, and / or just don't want to maintain a big yard. 

Landlords - What are your thoughts on pets.  My thinking is no inside cats or dogs, and outdoor pets must be kept on a leash or contained within fenced yard area.

I allow pets but charge a non-refundable fee plus extra pet rent. I also require that I meet the actual dog beforehand. Yes pets can cause damage, but if you can charge a non-refundable fee plus an extra $30-$50 per month I think it is worth it. Most pets won't cause more than a couple of hundred in damages, while the pet rent can be several thousand extra over a couple of years. If you don't allow pets, that will cut out a large % of your potential tenants.

Northstar

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Re: Single Family Home as a Rental?
« Reply #13 on: September 16, 2017, 10:45:34 PM »
Seems like a decent deal, where else are you going to make that much on your money? If you have 45k sitting there that you don't plan on using for anything else then might as well get something for it. Some people are asking all about location and yada yada, which is important, but being that it's right down from your house I'm gonna assume if the area is nice enough for you to buy a primary residence it's nice enough to own a rental close by. Just do your market research, on the home value an appraisal and inspection to make sure what you're getting into, identify why the property has turned so often with tenants, sometimes this is simply it's mismanaged then sometimes it's deeper than that, maybe a neighbor is just terrible and just runs people off cause they don't enjoy the environment, stuff like that. And if your numbers make sense. Pull the trigger. As for animals, I do not allow any, what so ever, takes down your pool of renters. But animals destroy things, I love my dogs but they are assholes and chew anything and everything. I don't allow pets in my rentals but that's personal preference, take a non refundable depo and bump the rent and roll with it if you want. All about live and learn and see what works for you. Wish you the best !