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Weinertron posted:I see renting for 2% of its value thrown around all over the place as a rule of thumb, is it a sign that one should rent if rents are under 1% of property value in a neighborhood? There's an upper middle class neighborhood near me where there are only a couple of rental houses, but they are being rented for $2400/mo in an area where homes are $380k+. Is this insane landlords losing money? I think the 2% rule is for economically depressed areas, you're basically slum lording. I own two rental properties in San Diego outright and I don't even get 1% despite purchasing them at below market value(both were foreclosures) and near the very bottom of the housing market. Maybe I've just been lucky but when I see people throwing numbers out like 50% of the rent going towards expenses I don't even understand how that can happen. Here's my personal experience with being a land lord. I purchased the properties a few months apart for similar amounts in the same neighborhood. Both were in decent enough condition when I bought them that repair costs were under $5000 total. The biggest one-time cost I've had was replacing a garage door that cost me a grand. Initially I didn't do enough tenant screening and I had a few bad tenants that cost me a few months rent. After a bad experience with a couple who left dog poop all over the house(literally, they had a dog who just shat in the house) I decided to up the rent and deposit for the next tenant. It took me longer to fill the vacancy but as of today I have two tenants who's been in those properties for 1.5 and 3 years respectively. They take decent care of the property and I make sure whenever they have a problem I get someone there right away to fix it or replace what's broken. My ROI was about 8.5%(~16k-17k net income on ~200k properties) until this year when home values in the area went up massively. So now I'm getting a little over 6% and my properties have appreciated ~33% in value. Now granted I could have gotten more from the stock market, but I wanted to diversify and I firmly believe that SD's mobile tech/biotech economy is very robust and housing prices will continue to rebound alongside the economy.
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Oct 22, 2013 04:16
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Dazzleberries posted:It's not so much slum lording, it's all about location where you can get 2%. Equivilent houses can have radically different values in different areas, while rents vary less. You can get a 50k house that rents for 1k in many areas, but in other areas the exact same house might cost 150k, and you'd be renting it for only 30% more. See I don't agree with this at all. Roofs here last 15 years or so, and a full replacement will cost ~10k(less for me since my dad is a contractor) for the size of property I have. Annualized over the its lifespan, the cost is less than $700 a year or only 4% of my net income. Furnaces are even less, a full replacement costs only about $1500, annualized over its lifespan and the cost is miniscule. Water heaters are cheap as well, and damages from a broken water heater or a leaky roof is covered by my insurance. As for things like vandalism by tenants. My landlord insurances covers all of that plus it has a rent guarantee if I get some deadbeats I have to evict. When I add it all up and run the numbers I don't get anywhere near 50%, more like 10%. Gamesguy fucked around with this message at 20:04 on Oct 22, 2013 |
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Oct 22, 2013 19:36
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Dazzleberries posted:But that's the thing, expenses are anything you spend money on, they aren't only repairs. You probably pay property taxes, you say you pay insurance, and in many situations you have to cover utilities, either all the time or at least during vacancies. I deducted these things, that's why I said net. You do have a point about vacancies, but so far I haven't had trouble filling fairly quickly. quote:Now let's say one of your tenants trashes the place and leaves, you have the security deposit for that right? Well let's say it costs 1k more than their deposit to fix the damage, oh now it's decision time, is that enough to warrant going after them in terms of your time and likely your money? Do you spend 1k to get a judgement for 1k and then have them declare bankrupcty? Or do you just eat the 1k and fix it? Just last month I was in this scenario and I opted to just eat it, only to later get a bankruptcy notice. None of the above, I file an insurance claim and my insurance reimburses me. Same thing with the eviction. quote:Without a doubt, if you are handy and can do many repairs yourself, manage your rentals yourself etc, you can have lower expenses (I'd say mid to high 30s) over a 15+ year period, but when you are evaluating what is a good purchase, it helps to use a conservative number like 50% to be able to identify what is a good investment or not. Adding absolutely everything including expected maintenance costs I still only get a 25% figure. Harry posted:How much is this insurance costing a month? Just from the numbers you're giving it's like $80 a month, which can't possibly cover all those things. Both policies combined cost a little over $1000/yr per property. Gamesguy fucked around with this message at 23:45 on Oct 22, 2013 |
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Oct 22, 2013 21:22
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