I posted a similar topic in the Investing forum, but thought I'd post here to get more traffic.

If you own (or have researched the possibility of owning) rental property... what numbers/percentages/ratios do you consider acceptable with respect to expenses/profits?

For example, if you find a property that costs $100K, and can get a 30-year mortgage for ~$500/mo, property taxes are $1800/year (150/mo), and insurance is $900/year (75/mo)... what would you need (in terms of rent) in order to make it worthwhile to you? The expenses above add up to $725/month. Would $750/month be OK (since you'd get some tax deductions or mortgage interest, property tax, etc)? Would you need $1000/month? More?

 

I'll share.

Bought a 2-unit house for $169k in 2008.
Financed 30 years at 5.875%, seems high but interest rates were higher in 2008
Mortgage, property taxes and insurance is $1290/month
Rent brings in $1375/month

It looks like it will be a $6500 write-off on my 2010 taxes

Most importantly, would I do it again? Yes

 

thats less then $100 a month profit? If one single thing went wrong that would easly be a loss of all your profit for the year.

 

You're forgetting the tax write-off plus the equity that I'm building. Also, there may or may not be appreciation when I sell it.

 

^ Yeah, I guess I'm thinking along the same lines. The reason that I'm interested in buying a rental property is to have positive cash flow. Maybe not a lot, but I'd hope that if I bought 4-6 properties, then the cash flow (assuming they were all occupied) would be enough to cover my own mortgage. If it's going to just be a 'break even' or even a 'on-paper profit' type of deal for the next 30 years, then I'm not sure I'd be interested in the effort.

So, I guess I'm trying to get an idea of what landlords' goals are. Do they shoot to have some percentage of profit? Do they shoot to break even, but have a paper-profit after taking tax deductions? Or do they just accept that they will/might take losses for the next X years but they're planning to profit when the mortgage is paid off and/or when they sell the property (at a profit, or to at least get their equity back out of it)?

 

Making sure that you can afford the mortgage if the property is vacant is the major key. Can you survive if there's no renter?

BTW, Florida has a massive market right now for rental houses since so many people lost their homes. Huge investment opportunity if you have the funds.

 

Keep in mind, that over time rents will go up, but your biggest expense, your mortgage will stay the same!

 

I just bought a house for rental. Here are the details:

Cost: $315K
Down pymt: $260K.
Borrowed: $55K @ 4.1% 15-year.
Mortgage, insurance, prop. tax: under $800/mo.
Monthly rent: $1950.

Best purchase I've ever done in my life. A house like this would have cost almost $600K just 3 years ago.

 

1) Never count on appreciation. Positive cash flow and income (including the potential tax benefit) are vital.

2) Rents don't always go up. In my area they are down about 25% from 3 years ago and show no signs of recovery. Many pre-foreclosure/short sale (speculator/flipper wanna-be) homes here have been turned into rentals to generate cash for the owners.

3) The tax-write off is definitely a benefit. Look into it - $25k in rental losses allowed to offset your regular income.

4) Once you get about a half-dozen rental houses, it can become a full-time job.

5) Look into getting deposit-only ATM cards to give to tenants for their rental payments.

6) @Steponme, you must be young. What a house cost 3 years ago is highly irrelevant and not indicative of how wise the purchase was. Wait a few years...hopefully your market has hit bottom, otherwise expect to see some equity shrinkage.

And finally, beware if you are buying in the hood: https://www.s2ki.com/forums/index.php?showt...0&#entry8712579

 

Not that young. Of course it's relevant, especially since economists are saying the housing market will rebound in the near future and be back to where it was in about 3-4 years. Wait a few years for what - to purchase a home? Hell no! It's the best time to buy a home, be it to live in or for rental. Of course it's relevant and indicative of how good a purchase is. Please don't pretend to lecture me. I don't like pretentious guys with a condescending tone of voice.

Another wrong here. Of course one can count on appreciation if the experts are predicting a rebound. Do you know what we're talking about here? We're talking about HOUSING. These things will not depreciate long: housing, land, natural resources (such as gold, diamond, crude oil, etc.), etc. The housing market crashed along with the banks, but as soon as the economy stabilizes, it'll rebound just as before (early '80s). HOUSING and LAND never depreciate for long. Remember that!!!

People, whom are you going to listen to - some guy "named" Chiung or experts such as Warren Buffet, Fortune, Fannie Mae, etc.?

http://www.therealestatebloggers.com/housi...ebound-in-2011/

http://www.housingwire.com/2011/01/19/fann...rly-1-5-million

http://finance.fortune.cnn.com/2010/12/27/...ousing-rebound/

Housing market in 2014:

http://realestate.yahoo.com/promo/housing-...st-by-2014.html

Good for me! What say you, Chiung? Yes, I'm very young - 3 years old!

http://blog.seattlepi.com/realestate...ves/217172.asp

http://repdx.com/2010/08/07/oregon-top-hou...market-by-2014/