So, we live in the mountain west. Summers are getting hotter, longer, and drier. The Colorado is getting lower and lower. Fires are burning everything every summer. My wife and I have wondered if, in our lifetimes, our mountain/ski town will just end up being a slightly cooler version of Phoenix.
We also have some excess cash sloshing around that I was saving for what I predicted to be a Covid RE crash (you can go find the thread)... and prices nationwide have mostly skyrocketed everywhere we'd even vaguely want to invest. Whoops. Looks like I'm not as clever as I thought.
In any case, there's a town in the remote northern Midwest that we have friends at, where we'd enjoy living. It has fun outdoor activities, lots of winter, and is a place that is supposedly not at risk for any of the main problems (ie flood/drought/fire/sea level rise/etc) of climate change. Supposedly.
It's also pretty cheap. A 3/1 SFH in halfway decent shape (it's the midwest, in the middle of nowhere) goes for $100k.
I picked a property essentially at random from Zillow for this analysis:
Cost $125,000
3/2 SFH, built in 1900.
Appears well maintained, electrical and HVAC upgraded to relatively modern standards (ie, no knob/tube, no coal furnace, nothing weird or dangerous)
Original Purchase price: $125,000
Original Mortgage Amount: $90,000 ($35k downpayment, ~25%)
Interest Rate: 4%
Mortgage Term: 30 years
Term remaining: 30 years
Amount remaining on mortgage: $90,000
Gross Rents: $1200-$1500, I'll assume the lower number
Principal and Interest (the P&I of your PITI - should match with the above info): $430
Taxes and Insurance (the T&I of your PITI): $250
HOA costs: $0
Deferred maintenance notes: 120 year old house in a cold climate, but assume nothing major currently wrong
I'd assume $250/mo for maintenance/capex to be safe, and $120/mo for management. Then $100 or so for vacancy.
So I end up right back at $1150/mo, basically, meaning the place makes money, but not any meaningful amount. That's mostly because I'm assuming quite a bit of maintenance, and rent on the lower end, but I think that's a safer assumption than going with the 1% of the house value rule of thumb here.
So while both 1% rule and 50% rule say this isn't bad, it ends up (with my conservative assumptions) just breaking even. As time passes it could do better (rents could rise a bit) and I'm getting some mortgage paydown, but this isn't an area where reselling will yield any profits in the future (IMO).
Normally I wouldn't touch something like that with a 10 foot pole, but this would be more of a climate change bailout option than a serious investment, so all I'd really want would be for it to break even and not be too much headache (I've always self-managed before but this is 1000 miles away, so that's probably not an option). But maybe that's dumb.
Thoughts?
-W