Evaluating Rental Property
I'm looking for my first deal and want to make sure I'm doing this correctly. The BEST deal I've found is the following:
$500k asking price
$ 30k/year rental income
$ 2.5k/year taxes (low taxes)
$ 3k/year in mgmt fees etc
--------------------------------
$ 24.5k NOI (actually, this is not even including water, sewer, etc)
Which is 4.9% of asking price of $500k (isn't this called the 'CAP' rate?).
This is the BEST deal I've seen. I'm reading others talking about 10% cap rate as AVERAGE. What am I doing wrong here.
thanks for any help.
-J[ Edited by JonDoe on Date 01/13/2004 ]
You may want to study more, or if this is your first deal you may want to start smaller to get your feet wet with less risk.
Hate to say it but RUN FROM THIS PROPERTY. Rents for a 500k property should be closer to 75k a year, at the least.
Heck, payments with 20% down will be more than 30k and that does not include maintaince, taxes or insurance.
[addsig]
I get $12000 annual income on a $50,000 duplex. If that is the best deal you can find send me your money and I will give you a 12% rate of interest on a property that I can buy at 70% of appraisal.
Good LUCK and Thank You
Hope this helps some
Ted Jr
That's the difference between NY and TX, I guess.
I looked at a couple of properties at Queens, NY; rents don't cover mortgage+costs, RE agent said I should buy for appreciation, like buying internet stocks in 1999.
I finally settled for a property in CT, paid 270k, annual rent 58k. Later, I got 2 more with slightly better rent:price ratio, but in lower-income areas, with related hassles.
thanks for the responses all.
Question: are your examples recent???
$58k rent vs $270k price ??
$12k rent vs $ 50k price ??
I mean interest rates ARE pretty low those days. What kind of property yields rents of 10% of recent purchase price? I admit I'm looking at higher-priced properties in nice high-growth areas (e.g. near ocean, hawaii, nj shore, san diego shore, manhattan, etc). Is this why I'm seeing such a huge discrepancy?
Should I be looking in smaller cities? Are there 'secret' cities where the NOI vs Price ratios are 10%+? We are talking strictly residential, right? Do I need to buy in a ghetto area to get these rates? (I don't want that hastle as a first-timer.)
thanks again for any help.
-J
[ Edited by JonDoe on Date 01/13/2004 ][ Edited by JonDoe on Date 01/13/2004 ]
JonDoe
You should maybe stay clear of Manhattan and check some properties in NJ and CT like ahmed deed:
ahmedmu,
It seems that you score prety good with those 2 CT properties?
58K/year for $270K sounds great to me. What do you anyhow do for living, if I may ask? [ Edited by EUREO on Date 01/15/2004 ]
I am in Iowa first of all. You need to consider this: Why would you buy a property that is going to lose you money? Yes you could buy for appreciation but that is somewhat like playing poker. The rents stay put and if the investment makes sense from the buying side then it will likely keep making sense provided you did your due dilegence.
I highly recommend the book "Rich Dad Poor Dad" by Robert Kiyosaki. He will put some perspective on things for you.
My personal recomendation is that you should look outside of the big city to find rental propreties that cash flow.
GOOD LUCK