DH and I are interested in having rental property now and in retirement. We do not currently have any properties. Due to economy of scale, it seems most desirable to have triplexes or small apartment complexes. We are quite capable of managing and maintaining them ourselves.
So, we browse realtor.com frequently and have been eyeing a 24 unit complex. It has 14 one bedroom units and 10 two bedroom units. The one beds are rented at $390 and two bed at $430/mo. It is listed at $850k. The listing says it is fully rented at $10340/mo.
We do not have 20% to put down for the property. So, at this point it is all speculation and learning.
So, if the property sold at $850000, it would need to earn $8500/mo in rent to meet the 1% rule. So that is a green light.
Assuming 100% financed at 6.5%, the P&I is $5372. Property taxes are around $9400/year. I guessed insurance would be around $8500/yr. So, monthly it would cost $6864. Half of rents ($5170) go to everything except P&I and the other half if is P&I and profit, right? So, this situation does not get the red light. Right?
At an $800k purchase price, the P&I is $5056, which is $114/mo in profit. Is that enough of a profit to make it worth it?
At $765k (90% of asking price), P&I is $4835, which is $335/mo in profit. Is that enough profit?
What would make this complete profitable? I see a lot of places around here renting in the $5-600 range for SFRs.
Is it OK to assume maintenance would be lower on a single building than on 24 SFRs? Is it OK to plan for most maintenance/management to be done by our selves? How do you adjust your 50/50% spread to figure profitability with those assumptions?
I can post the address of the complex if that makes any difference.
I totally guessed on the interest rate and insurance costs. Was I right to figure these numbers as if 100% was financed? Do banks typically require 20% down?
Thanks for the info!