Author Topic: Am I Crazy For Considering This Rental?  (Read 2013 times)

2Birds1Stone

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Am I Crazy For Considering This Rental?
« on: January 13, 2016, 09:56:33 AM »
I have a coworker who is selling a "Tiny House".

It is 400 square feet on a 4,500 square foot lot.

Newly built in 2012, new SS appliances, new washer drier, new heating/electric, electric fireplace, patio, fire pit, 2 storage sheds, 2 car driveway.

The neighborhood is decent, 3 schools with 6-8/10 rating on Zillow.

7 miles from a large SUNY University (NYS).

Asking price is $45,000

Taxes assessed in 2014 @ $1,800/yr.

I am considering purchasing and renting to a student/couple. I am confident that I can fetch $500-600/month in rent.

My biggest concern is that I am located ~4.5 hours away. Otherwise I would jump on this pretty quickly.


Any advice/tips/concerns?

COMPLETE RE Investing noob here.

zephyr911

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Re: Am I Crazy For Considering This Rental?
« Reply #1 on: January 13, 2016, 10:10:28 AM »
It could be a good one, especially if you can get $600, but make sure you're questioning all your assumptions - what data points are you using for your rental estimate? Is the tax bill based on a homestead exemption that you won't get? Really need to get a full picture of all costs. Brand new, maintenance could be pretty minimal, but eventually things will start breaking. It all adds up.

4.5 hours away is far enough to need paid management, especially if you're a first-timer. It'd be wise to talk to some management companies up there - don't just ask for rates, ask if they will help you evaluate this potential buy in exchange for hiring them to manage it. Some will do that.

Unless you plan on holding forever (which I do with all of mine) think about how you'd handle an eventual resale. TH is a small niche market so it could be hard to unload, forcing you to sell at a discount. Ask more questions. It's definitely in the ballpark for consideration though.

norabird

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Re: Am I Crazy For Considering This Rental?
« Reply #2 on: January 13, 2016, 02:42:06 PM »
Sounds great to me.

2Birds1Stone

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Re: Am I Crazy For Considering This Rental?
« Reply #3 on: January 13, 2016, 02:48:43 PM »
It could be a good one, especially if you can get $600, but make sure you're questioning all your assumptions - what data points are you using for your rental estimate? Is the tax bill based on a homestead exemption that you won't get? Really need to get a full picture of all costs. Brand new, maintenance could be pretty minimal, but eventually things will start breaking. It all adds up.

4.5 hours away is far enough to need paid management, especially if you're a first-timer. It'd be wise to talk to some management companies up there - don't just ask for rates, ask if they will help you evaluate this potential buy in exchange for hiring them to manage it. Some will do that.

Unless you plan on holding forever (which I do with all of mine) think about how you'd handle an eventual resale. TH is a small niche market so it could be hard to unload, forcing you to sell at a discount. Ask more questions. It's definitely in the ballpark for consideration though.

Some great points, I will be speaking with the seller directly tonight.

I will ask about homestead exemption, sewage set up, etc.

The resale value/ appraisal is what I worry about most. I would hate to dump $40k+ into something that will be hard/impossible to get out of when the time comes.


zephyr911

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Re: Am I Crazy For Considering This Rental?
« Reply #4 on: January 14, 2016, 08:55:43 AM »
Yeah, I have a huge personal fascination with the TH movement and am looking at ways to make it work for me, but in terms of an investment in real estate, just always be aware that anything recognized as an "outlier" has lower liquidity.

My mom, god bless her, was an agent when I was a kid and has helped steer my analysis and buying decisions as I later became a homeowner, investor, and agent myself. Thanks to her, nothing excites me more than a boring, cookie-cutter, 1100-1500SF, 3BR, 2BA house, stuck in the middle of a huge tract of identical or at least similar homes. ;)

That said, I'd still consider this if it were near me. Three of my prospects right now are ~$40k SFHs rented for $595... slightly cheaper but bigger and older, with more maintenance costs expected.

The two questions I'd be most interested in answering in detail, and with high precision, are the likely rent (are there any legitimate comps nearby? Is this the only TH in the neighborhood?) and the likely upkeep. This home could have a real advantage in terms of maintenance costs because there's just less stuff to break. Even when major components start hitting EOL, you might run less than the 50% rule of thumb for total costs, based on that. But it really bears detailed research, and with TH being relatively new there may not be a lot of historical data. And some builders might be kicking out poor-quality units too, negating the benefit.

But I ramble... does this make sense?