The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: iknowiyam on June 25, 2015, 04:10:21 PM
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Just toying with the idea at this point.
2 bedroom, 1 bath. List price $107,000. Assume 20% down payment.
I have an idea that the rent would be at least $1000, and there is a rented condo nearby (newer but much closer to crappy loud highway) at $1400. The house is older but appears to be in decent shape. I should also note that it is VERY difficult to find a house to rent in this area. I happen to know other houses in the area are often requiring a 2-year lease just because they can.
Hypothetical math time.
rent: $1000
mortgage: ($410)
taxes: ($120)
insurance: ($50)
$420 remains if I manage it myself. I know I am missing repairs and some overhead. I know the tax is likely correct because I live/own already in the same town. Let's round down to $400 to be safe.
$400 x 12 = $4800/yr or a little over 4 years to get my down payment back plus 1 more year to cover closing costs for a total of 5 yrs to profit. 4 yrs to profit if rent is $1100 and est remainder is $500.
Any thoughts?
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A common rule of thumb is that a property ought to produce rents of at least 1% of sales price, and this one is marginal. When I do the math, I figure $100/mo repair costs for a small house (including new roof and HVAC every 15 yrs), and you're only estimating $20/mo. In some parts of the country, roofs last longer. But repair costs are very cheap where I live. If you're serious about this, you should put more thought into cost of maintenance.
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A common rule of thumb is that a property ought to produce rents of at least 1% of sales price, and this one is marginal. When I do the math, I figure $100/mo repair costs for a small house (including new roof and HVAC every 15 yrs), and you're only estimating $20/mo. In some parts of the country, roofs last longer. But repair costs are very cheap where I live. If you're serious about this, you should put more thought into cost of maintenance.
If I found out how much other houses in the neighborhood are renting for maybe I would have a better picture. I suspect it is higher than $1000 since really cruddy 2/1 apartments next door are a minimum of $950, but I don't know for sure.
Thank you!
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Craigslist and Zillow are good places to get info about how much properties are renting for. I normally plan to ask a little less because I'm picky about tenants.