Author Topic: Rough Numbers on Real Estate Rental Investment  (Read 861 times)

soccerluvof4

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Rough Numbers on Real Estate Rental Investment
« on: January 17, 2021, 05:05:25 AM »
I know alot of people here have done well with Real Estate and I have been looking for years and just havent found anything. Yesterday something kinda fell in my lap and I am just curious on rough numbers if it would be worth it and what I would need for rent.

Here are the numbers , the house is 3 Bedrooms and 1 1/2 baths and I wouldnt have to put anything in it right away but could easily put 25k into it and get it back.

165k , I would have to make a cash offer and then decide whether I would want to finance or not. Not sure I want to part with that much of my cash though I still should be fine.

taxes around 3k a month based on an assesment of 161k. House increased in value 8% in 2020 and predictions are 10% in 2021.

Utilities all in would be under 500 a month.
Home comes with a 1 year HSA warranty.

The house sold in 2008 for 155k to the current owners who put 12k into the basement for wall supports on the foundation. The foundation does look very solid and basement looks like it has remained dry. There is a lifetime guarantee on the supports and the company they used Is the most reputable in our area for issues they had so one could imo finish the big basement at some point if they want to as well. Also has very high ceilings with no obstruction.

If you owned this what would you charge for rent minimum and would realistically prefer to get? I am thinking of buying and renting to my oldest son and first and allowing him to get a roomate as he is pretty responsible and maybe down the line sell to him BUT i want to look at it as a real transaction first hence the minimum part of the equation.
« Last Edit: January 17, 2021, 06:01:59 AM by soccerluvof4 »

rothwem

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #1 on: January 17, 2021, 05:32:54 AM »
Rent doesn’t really correlate to house price. It tracks wages, which are local to the area. You need to find some comps, check Zillow to see what similar houses are renting for in the area.

Personally, I’d probably want ~1500-1600 per month from that place for it to be worth renting.

soccerluvof4

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #2 on: January 17, 2021, 05:41:49 AM »
Rent doesn’t really correlate to house price. It tracks wages, which are local to the area. You need to find some comps, check Zillow to see what similar houses are renting for in the area.

Personally, I’d probably want ~1500-1600 per month from that place for it to be worth renting.



I was thinking about 1600 a month myself. I will look up rent in the areas as you say. I looked up house prices just for kicks and its nicer than the half dozen houses around it and the least per square foot by at least 25k

Paper Chaser

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #3 on: January 17, 2021, 06:52:41 AM »
Rentometer isn't another dat point worth checking:
https://www.rentometer.com

As are Craigslist and Facebook marketplace for your location.

Honestly, it sounds like it might be a decent candidate for a flip if you're getting it well under market value. Do some minor clean up, maybe finish the basement to increase the sqft, and put it back on the market.

wageslave23

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #4 on: January 17, 2021, 06:53:14 AM »
Utilities are usually paid by the renter.  I would say about 1500 to make it worth it to you. But again its what the market for rentals is in the area.  Some areas have very high rent and some very low.

soccerluvof4

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #5 on: January 17, 2021, 06:57:22 AM »
Rents are all over the place from 1300 on the low end to 2300 on the high end and even less square footage. I would think the more I look in the absolute worse case scenario I could get 1400$ and they pay for Utilites but think equally because of its location to the freeway and convenience to things and good school system I should be able to get 1600.

soccerluvof4

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #6 on: January 17, 2021, 07:04:41 AM »
Rentometer isn't another dat point worth checking:
https://www.rentometer.com

As are Craigslist and Facebook marketplace for your location.

Honestly, it sounds like it might be a decent candidate for a flip if you're getting it well under market value. Do some minor clean up, maybe finish the basement to increase the sqft, and put it back on the market.


There are no houses available to rent and rentometer shows 1275$ median on otherside of Freeway which is couple miles away and the freeway serves as a big buffer from a major city county vs the house being in a suburb county and the type of renter you would attract. The rents it shows are all east of the house I am thinking of and the rents to the south and North are way higher for what that is worth.

Paper Chaser

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #7 on: January 17, 2021, 07:16:58 AM »
Is it currently a rental? In most places, investment properties are taxed at higher rates than owner-occupied properties, so the taxes you'd pay as a landlord may be a lot higher than what the current owner has been paying.

Also need to think about any taxes, etc that would be incurred when you pull the cash to buy it.

Any major repairs in the coming years will also need to be budgeted. Having to replace a $10k roof or HVAC system can wipe out years of cash flow.

rantk81

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #8 on: January 17, 2021, 07:22:13 AM »
I was a landlord of a couple properties for about 8 years.  I was relatively lucky with mostly non-problematic-tenants.  I made a decent return.  But the return wasn't great when compared to the amount of hassles involved in being a landlord and compared against what I would have made by just passively investing in the market anyway.

I never want to be a landlord again.

soccerluvof4

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #9 on: January 17, 2021, 07:31:23 AM »
Is it currently a rental? In most places, investment properties are taxed at higher rates than owner-occupied properties, so the taxes you'd pay as a landlord may be a lot higher than what the current owner has been paying.

Also need to think about any taxes, etc that would be incurred when you pull the cash to buy it.

Any major repairs in the coming years will also need to be budgeted. Having to replace a $10k roof or HVAC system can wipe out years of cash flow.



No it is owner occupied. To bring the house to lets say 100% I would say from Flipping a few houses i would put 25k max in it. So then say 185k in if i did up front I would need 1700 a month 1850? I guess at that point if I got jammed up and did not want to deal with the renters my out would be I would easily get 200k for the house as long as the other things that I mentioned checked out and I wouldnt buy it unless they did.

SwordGuy

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #10 on: January 17, 2021, 07:42:03 AM »
what the hell???!!!

Taxes are $3000 a month and you're getting advice of $1600 a month for rent?   

You'll need a bucket brigade to carry the cash you'll be losing each month.

Hell no!   That's crazy talk!

The house sold for 155K 12 years ago and now it's selling for 165K, after a 12K improvement (a 2k loss!), but you're expecting  10% increase in valuation this year?    And you expect you could put 25K into it and get that money back?   What evidence do you have to back that up?

Have you learned how to calculate profit on a real estate investment?  If not, you need to get Gallinelli's book on Cash Flow and other real estate measures.

Kierun

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #11 on: January 17, 2021, 07:52:31 AM »
what the hell???!!!

Taxes are $3000 a month and you're getting advice of $1600 a month for rent?   

You'll need a bucket brigade to carry the cash you'll be losing each month.

Hell no!   That's crazy talk!
This jumped out to me as well.

uniwelder

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #12 on: January 17, 2021, 09:10:11 AM »
what the hell???!!!

Taxes are $3000 a month and you're getting advice of $1600 a month for rent?   

You'll need a bucket brigade to carry the cash you'll be losing each month.

Hell no!   That's crazy talk!
This jumped out to me as well.

I'm hoping it was mistyped and actually meant "3k a year"

uniwelder

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #13 on: January 17, 2021, 09:15:54 AM »
The house sold for 155K 12 years ago and now it's selling for 165K, after a 12K improvement (a 2k loss!), but you're expecting  10% increase in valuation this year?    And you expect you could put 25K into it and get that money back?   What evidence do you have to back that up?

The 12k wasn't an improvement, it was a repair to the basement foundation wall.

soccerluvof4

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #14 on: January 17, 2021, 09:20:27 AM »
Its 2900 a year yes not 3k a month

and yes a repair not an improvement.

waltworks

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #15 on: January 17, 2021, 10:27:09 AM »
If I were analyzing this:
-$250/mo in tax
-$100/mo insurance (could be less, but it depends on the house/area/etc)
-$150/mo for management
-$100/mo for vacancy
-$200-300/mo for maintenance and capex

Unless you live in a really weird area where renters of SFHs don't pay utilities, your renters will pay that.

So your overhead is around $800-900/mo. You should try to get more accurate numbers, obviously. If you rent for $1500, you'll make $600-700 profit.

Assuming you're going to pay $165k cash for the place, plus $5k of closing costs, and you're getting $8500/year in profit, that's a 5% return.

Not great for a risky asset, but my numbers are on the conservative side as always.

I'd want around $2k in rent to make it worth my while.

-W

soccerluvof4

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #16 on: January 17, 2021, 11:26:38 AM »
If I were analyzing this:
-$250/mo in tax
-$100/mo insurance (could be less, but it depends on the house/area/etc)
-$150/mo for management
-$100/mo for vacancy
-$200-300/mo for maintenance and capex

Unless you live in a really weird area where renters of SFHs don't pay utilities, your renters will pay that.

So your overhead is around $800-900/mo. You should try to get more accurate numbers, obviously. If you rent for $1500, you'll make $600-700 profit.

Assuming you're going to pay $165k cash for the place, plus $5k of closing costs, and you're getting $8500/year in profit, that's a 5% return.

Not great for a risky asset, but my numbers are on the conservative side as always.

I'd want around $2k in rent to make it worth my while.

-W


Thanks for your reply. Helps alot. I just came from the house again with a different person I know that does a lot of real-estate and there feeling is I could get 1800$ all day as there is not another house for sale in the town and no houses for rent. With some updates they felt I could get in the low 2's 21-2200. I am thinking I am going to write an offer for 160k all cash and seller is not responsible for first 5k in repairs so I have a max risk of 165k subject to a Home inspection and Structural Inspection. I did find out the structural work is transferable so thats good but I want to know that cracking and stuff I see are do to that original problem and not rafter or other issues. If they accept that then it would require all cosmetic repairs I can do myself to get the low2's.  If not screw it I will just walk away.

soccerluvof4

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #17 on: January 17, 2021, 02:48:19 PM »
So just an update, I left them a message to give me 24 hours because I wanted to see if the numbers work and I just found out they called a broker and already have 2 offers so looks like I am out of the game. Oh well wasnt meant to be but at least I learned alot and I can be better prepared and look for more opportunities.

SndcxxJ

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #18 on: January 17, 2021, 07:09:59 PM »
I wouldn't say you are out of the game until they reject your offer.  Sometimes brokers say things that aren't true to generate good offers quickly.  I would proceed with your contract and let them reject it if you feel it is a good house, a good area, the right price, and you have the ability to close.  You have a full price all cash offer and that is nothing to scoff at.

soccerluvof4

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Re: Rough Numbers on Real Estate Rental Investment
« Reply #19 on: January 18, 2021, 03:16:52 AM »
I wouldn't say you are out of the game until they reject your offer.  Sometimes brokers say things that aren't true to generate good offers quickly.  I would proceed with your contract and let them reject it if you feel it is a good house, a good area, the right price, and you have the ability to close.  You have a full price all cash offer and that is nothing to scoff at.

I hear ya and almost did but instead I just decided I will wait till Tuesday and see if something appears about an offer. If not than I know exactly what your saying. It was just getting stupid and to much he said she said so needed to step back and breathe. I am looking today at a couple areas and more comps as well to keep familiarizing myself outside my immediate area but within a reasonable distance.