Author Topic: What do you think of this house as a rental?  (Read 1489 times)

Pizzabrewer

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What do you think of this house as a rental?
« on: February 27, 2017, 02:48:34 AM »
So, I know nothing about buying properties for rent. I would certainly do a ton of research before making the leap, but this house in my block got me thinking. Asking price $114,900, Zillow estimates it would rent for $1.2k.

Any obvious first thoughts?  Thanks.

https://www.zillow.com/homedetails/311-Midwood-Dr-Liverpool-NY-13088/31769703_zpid

Shanksy

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Re: What do you think of this house as a rental?
« Reply #1 on: February 27, 2017, 06:41:55 AM »
I have absolutely nothing helpful for you about rental properties, I've never purchased or managed them. But I had to jump in and say, WOW your schools in that area are a million times better than the ones here in Arizona. Especially in lower priced home areas. For a house that price here in Phoenix, you would be lucky to get a 3 out of ten school. More likely a 1.

Best of luck!

Ben Hogan

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Re: What do you think of this house as a rental?
« Reply #2 on: February 27, 2017, 06:45:57 AM »
it is a tiny 4 bed room with 1 bath, not sure how well that will sit with potential renters. Property tax are not too bad, is there an HOA? In texas that is the size of a mobile home, not sure how those things endure the weather up there.

YttriumNitrate

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Re: What do you think of this house as a rental?
« Reply #3 on: February 27, 2017, 08:38:57 AM »
Figuring $4,500 in property taxes, $1,200 in maintenance, $1000 in insurance, and one month per year vacancy, you walk away with $6500 a year. I'd much rather put $114,900 into a generic index fund than that house.

Mola

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Re: What do you think of this house as a rental?
« Reply #4 on: March 01, 2017, 01:57:16 PM »
First thoughts:
  • I dont know anything about NY
  • Given that, it rents at 1% of value which is fine if the house is in a place that will gather some appreciation and not have terrible tenants. (You will want more rent to value if you get no depreciation and have tenant headaches)
  • However, again I don't know anything about NY. That rent to value may be a total steal or a loser. It's really a question of your opportunity costs. What are other options in NY like?

So I think its worth the research. If you put in 20 hours of research and realize its a dumb idea, you are now 20 hours smarter. And that's the real return on investment that people new to Real Estate should be trying to make. So start making brain dollars.

tralfamadorian

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Re: What do you think of this house as a rental?
« Reply #5 on: March 02, 2017, 03:56:33 PM »
I would not choose it as a rental for three reasons:

1) Zillow rent estimates are useless.  Rentometer shouldn't be used for a final decision but are much better for a first pass.  The two closest estimates on rentometer give $1,100 and $800.  Given that this property is right on the highway, it probably is closer to the $800 number. 
https://www.rentometer.com/

2) A quick search gives a real estate tax rate of $4.75, which is really high- $4,506/yr.  This tax rate makes the 1% rule unusable in that market.  (data on zillow)

3) According to great schools, the assigned schools are a 5, 5 and 6, which is not bad.  But there's an 8 primary school 4 miles away, which would be more desirable for families.  You will have more problems getting and keeping the best renters on this property vs a property in the better district.

A quick rental calculator shows that this property would be a big cash bleeder during the entirety of a 30 year mortgage.


turtlefire

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Re: What do you think of this house as a rental?
« Reply #6 on: March 02, 2017, 08:47:58 PM »
Here are a few pieces of advice;

1. Never rely on data systems like Rentometer or Zillow. They are inaccurate. Use what is going on in your current market, look on craigslist for comparable places. Find the $/SF from this research, talk to rental agents, and talk to property management firms. All of which can give you a very accurate idea as to what you can rent it at.

2. The 1% rule is such an arbitrary and a ridiculous number to go by. All you need to do is find out if it cash flows, and if you can maintain that over time.

3. Anyone who puts percentages of expenses to gross rent has no clue what they are talking about. They are generalizations that rarely ever come true.

cchrissyy

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Re: What do you think of this house as a rental?
« Reply #7 on: March 02, 2017, 11:54:21 PM »
I'm a landlord and renter and in my area, actual rents are far higher than what zillow thinks.

I don't know anything about NY but I do know to take Zillow with a big grain of salt on the home values as well.  You can't get a meaningful view of purchase price compared to rental price if neither of your inputs is trustworthy.

bosspross

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Re: What do you think of this house as a rental?
« Reply #8 on: March 03, 2017, 07:33:45 PM »
I live in NY and am a landlord although I am not familiar with that area. I would run from this deal mainly for the reasons other people have posted. Let's just say the 1200 rent is accurate (which it most likely is not as others have commented on) your estimate cost would be as follows:

P&I 458
Taxes 375
Insurance 93
Vacancy 100
repairs 240
Water/sewer/garbage 100

Totaling these up would give you a negative cash flow of $166 even with the higher rent. The 1% rule does not work in NY state typically because he have higher property tax and higher insurance. Typically I look for a 2% rule. An index fund would probably make more money and be less work.