Is This Worthwhile?
Newbie investor here. Hope you'll excuse the lame questions. In general this seems like a good deal (assuming the 1% rule for rent/purchase price)
This is what I'm looking at:
$29,000 purchase price
big 5 br/2 bath house close to major university
$550 rent
management fee is %10 rental
You'll need to give much more detailed info than that to get any real responses to your question.
You say that it seems like a good deal assuming 1% of purchase for rent, but the purchase price is only $29K, so rent would only be $290, correct? A little confused here
Management fee is pretty standard, but is it worth it if this is your first rental?
Where is the property in general? You mention near a major university, but no city is given. My first thought is that a 5/2 for only $29K will have some major, major repairing/rehabbing, but it may depend on your location.
Roger
Thanks, Roger
Sorry for the sparse info I gave - I am rather green.
It is in Buffalo. I meant that I evaluate the deal based on a rent that is %1 of the purchase price (that's the rule of thumb Sheets talks about at least).
The purchase price is actually around 32k and the expected rent is around $550. The property is being renovated right now.
Still not clear as how you're trying to base the deal on the 1% guideline. If you purchase for $32K, then rent should be about $320/month and not $550, correct?
Expected rent is only one issue of a number in order to decide if it's a good deal. In the house's current condition, is $32K about FMV or is it underpriced? Does the house need repairs? If so, what are they and how much will it cost? How long will it take to repair? How long will it take for you to get the property rented? Will you be renting primarily to college students? If so, what will you do in the "off" season and are you prepared for more than normal rental damage? Will renting to college students put a premium on your insurance costs?
These are just a few questions I'd have just off the top of my head.
Roger
Thanks, Roger.
I base the %1 as guideline and based on that the property is underpriced. The expected rent rate is $550 based on similar properties in neighborhood.
The associated cost for renovation would be about $6k. I'd hire a property mgmt company for renters - they'll take %10 off rent. Vacancy rate is expected to be about 10%. So I'm thinking anything below 50k for the property is a good deal.
The biggest problem is this is out of state as I am in Boston and I have not seen the property apart from pictures so I'll probably pass on it. Otherwise it would be a done deal.