Author Topic: Talk me out of (or into) building a rental property.  (Read 2039 times)

nellebird

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Talk me out of (or into) building a rental property.
« on: September 08, 2016, 12:03:53 PM »
So I've been itching to get into rentals for a while now, - and our area has a pretty good market - alot of high up executives that need short term (2 years) housing, college students, and then regular families.

A 2 bedroom 1 bath apartment ranges from 600-850 mo
3 bedroom 800-1000

3 bedroom house probably sit around 850-1300.

I found some land (not in the nicest location, but still very rentable...close to everything), for $7,500

Then I found this:
http://www.ebay.com/itm/Steel-Frame-Cabin-Kit-3-Bedroom-2-Bath-896-sqft-INC-METAL-ROOFING-SIDING-/191851983338?hash=item2cab44f1ea:g:ZksAAOSwzLlXg89K

That means to roughly frame the house would be around 10,000, I'm estimating around another $6,000 to finish (husband is a contractor, so we can do some work ourselves, although we are trying to avoid making this complete DIY),

All together that comes to around 23,500 for a brand new three bedroom house to rent.

If I'm renting that out at $900 mo even with taxes, upkeep (which should be minimal on a brand new property), and mortgage payment I'm bringing in a healthy 700 a month. Or I could aggressively pay the property off completely and own it outright in 2.5/3 years.

What am I not thinking of? Tear my idea to shreds :)

iris lily

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Re: Talk me out of (or into) building a rental property.
« Reply #1 on: September 08, 2016, 12:19:04 PM »
Your cost estimate is ridiculously low. You think you can do systems=plumbing, electrical, Hvac, septic or sewer as well as flooring and all cabinentry for $6,000? Do I understand that correctly?

It sits on a slab.m Hereabouts just that would be a good $5,000 for just the concrete.
« Last Edit: September 08, 2016, 12:21:27 PM by iris lily »

Marvel2017

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Re: Talk me out of (or into) building a rental property.
« Reply #2 on: September 08, 2016, 12:24:05 PM »
HVAC alone will probably be $6k

ShoulderThingThatGoesUp

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Re: Talk me out of (or into) building a rental property.
« Reply #3 on: September 08, 2016, 12:24:47 PM »
If you could build a house for $23k...things would be very different.

nellebird

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Re: Talk me out of (or into) building a rental property.
« Reply #4 on: September 08, 2016, 12:27:55 PM »
Your cost estimate is ridiculously low. You think you can do systems=plumbing, electrical, Hvac, septic or sewer as well as flooring and all cabinentry for $6,000? Do I understand that correctly?

It sits on a slab.m Hereabouts just that would be a good $5,000 for just the concrete.

The quote for slab here is around 3,000, If my husband does it,  it would be less.

dandarc

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Re: Talk me out of (or into) building a rental property.
« Reply #5 on: September 08, 2016, 12:28:31 PM »
Yeah - this isn't 23.5K all-in.  If you just build what comes with that kit, you'll basically have a gigantic shed.

Quote
What is NOT INCLUDED with this Kit?


Anything and everything not listed as included; which includes but is NOT limited to:
Interior wall framing
Porch materials
Flooring for the second floor (frame is included)
Furring strips for the inside of the exterior walls for installing insulation, drywall, or paneling. The furring strips may be wood or steel (optional CSC item)
Drywall, paneling and/or all other finishing material
Plumbing, electrical, doors, windows, insulation, etc.

nellebird

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Re: Talk me out of (or into) building a rental property.
« Reply #6 on: September 08, 2016, 12:28:50 PM »
HVAC alone will probably be $6k

Whoops, HVAC - That's very true, it would be around 6k

nellebird

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Re: Talk me out of (or into) building a rental property.
« Reply #7 on: September 08, 2016, 01:07:57 PM »
Perfect! Thanks everyone - I knew it was too good to be true :)


bobechs

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Re: Talk me out of (or into) building a rental property.
« Reply #8 on: September 08, 2016, 01:08:39 PM »
If you could build a house for $23k...things would be very different.

Yes, indeed they would.

Looking through the other end of the scope... I would be interested to see a bill of materials for erecting and finishing out this cabin to just  minimum code (eg. IRC 2012, for simplicity) using any of the standard construction estimating software (or even the demo version of something as notoriously lowballish as Xactware) anywhere in the country.

Labor, legal compliance, general overhead and so on all eliminated, just to see...
« Last Edit: September 08, 2016, 01:17:46 PM by bobechs »

Fishindude

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Re: Talk me out of (or into) building a rental property.
« Reply #9 on: September 08, 2016, 01:48:47 PM »
I'm a builder and just built myself a 1,000 SF, two bedroom cabin.   
The exterior is pole barn metal and the interior is pretty minimally finished, concrete floor, OSB on ceilings, a very simple HVAC system, gravel driveway, etc.
I have approx. $122,000 in the project turn key + land costs.

This isn't something you would rent to a professional or a family, it's a cabin.

If you can do those for $23,000 I'll take a dozen.

Landlady

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Re: Talk me out of (or into) building a rental property.
« Reply #10 on: September 08, 2016, 01:57:20 PM »
Interesting idea. You could probably put a double wide on it...

I'd be careful with the decision making here because you don't want to devalue the property by putting something on there that won't sell once you're ready to sell. Ideally you'd want to have something on the property that would give you good rental income AND appreciate in value over time. A small cabin or a double wide will likely detract from the value over time and you may end up having to sell it for the price of the land.

I'm very interested in this discussion though because I'm building a house myself right now and we've planned two rental units in the plans. One unit is attached and meant for our parents when they visit and we will rent it when they aren't in town. And the second unit is above the garage for either bnb guests or long term tenants. By my math I should be able to get guests and tenants pay for most of our mortgage once the house is built. Of course we will also live in the house which gives us primary residence there.

bpleshek

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Re: Talk me out of (or into) building a rental property.
« Reply #11 on: September 09, 2016, 09:23:16 AM »
You mention executives needing short term lodging.  I don't suspect that someone earning 150k+/year would be interested in what you are proposing.  I could be wrong.  So, you're looking at "regular families" and "college students."

I don't know about the area that you are in, but in my area, the cost to replace(rebuild) a house usually costs more(a lot more) than the cost to purchase one.  Just ask your insurance agent about the cost to replace your house if it totally burns to the ground.  I probably wouldn't build just to rent.  I'd just buy someone else's property at a huge discount(short sale, foreclosure) and then rent that out instead. 

Now if you are a construction professional and can do many of the things yourself, then maybe I might consider it.  However, don't forget to count the cost of your time in the calculation.  After all, you could be making money elsewhere.

This seems highly speculative to me.

Brian