Investment Property
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- Posts: 3
- Joined: Fri Sep 19, 2014 7:13 am
Investment Property
Hi
New poster to the web site. I wanted some advice on a investment property
Details - New Construction (the community will have walking trails, dog park, tot lots, club house).
Price - 329,999
Down payment - 130,000
Comparable rent per month - 22,200 per year
Property taxes - 4000 per year
HOA - 1164 per year
Excellent credit
Tax Bracket - 28% federal
Already own another townhome for investment and have 40% equity on that town home. No other debt with primary residence fully paid off
The town house is next to a town center which is slowly expanding and most of the big stores will start moving in soon (Sams, Target etc) and construction in the area is booming with lots of homes under construction. There are also a lot of houses available for rent in and around the area
Not sure if this is a good investment. Any advice would help
New poster to the web site. I wanted some advice on a investment property
Details - New Construction (the community will have walking trails, dog park, tot lots, club house).
Price - 329,999
Down payment - 130,000
Comparable rent per month - 22,200 per year
Property taxes - 4000 per year
HOA - 1164 per year
Excellent credit
Tax Bracket - 28% federal
Already own another townhome for investment and have 40% equity on that town home. No other debt with primary residence fully paid off
The town house is next to a town center which is slowly expanding and most of the big stores will start moving in soon (Sams, Target etc) and construction in the area is booming with lots of homes under construction. There are also a lot of houses available for rent in and around the area
Not sure if this is a good investment. Any advice would help
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- Posts: 3
- Joined: Fri Sep 19, 2014 7:13 am
Re: Investment Property
Any thoughts ...... bump .......
- bogleblitz
- Posts: 506
- Joined: Mon Oct 01, 2012 2:51 pm
Re: Investment Property
I go by the 10% rule. so a $329k house should get $3,290 in monthly rent.
I did own a $330k townhouse and collected $2000 rent for 3 years during 2008 because I couldn't sell it. Sold it in 2011.
I think I did well those 3 years but I'm making more money now collecting rent from a multifamily house instead of a townhouse.
I did own a $330k townhouse and collected $2000 rent for 3 years during 2008 because I couldn't sell it. Sold it in 2011.
I think I did well those 3 years but I'm making more money now collecting rent from a multifamily house instead of a townhouse.
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- Posts: 3908
- Joined: Fri Jan 17, 2014 9:19 am
Re: Investment Property
I am having a problem to buy a new house for other people to live.
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- Posts: 3
- Joined: Fri Sep 19, 2014 7:13 am
Re: Investment Property
The thought was that it would be less maintenance for the first 10 years and if the property appreciates well, then sell it after 10 years. Maybe not so smart but wanted to get different perspectives before deciding on the deal. I am not that savvy in investment properties but a complete boglehead in all other areas
Re: Investment Property
Multi family properties for the most part will generate far better return than townhouses. I would stick to them. Return is not high enough with town houses. I own a 2 family townhouse in NY and the return (IRR) is about 8%.
- HardKnocker
- Posts: 2063
- Joined: Mon Oct 06, 2008 11:55 am
- Location: New Jersey USA
Re: Investment Property
I can't see how buying a new home for full market value would be a good investment unless the market is superhot or you hold the property for years and years. Otherwise you are stuck.
As long as they are still building out the development you will likely not be able to sell it for what you invested.
Circumstances can change and you might have to sell it before you plan too in 30 years.
In real estate you make money going in. Unless you can buy it at a big discount I vote NO on this.
As long as they are still building out the development you will likely not be able to sell it for what you invested.
Circumstances can change and you might have to sell it before you plan too in 30 years.
In real estate you make money going in. Unless you can buy it at a big discount I vote NO on this.
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett
Re: Investment Property
Do you mean 1%?bogleblitz wrote:I go by the 10% rule. so a $329k house should get $3,290 in monthly rent.
OP- I would not buy a new construction house as a rental. Especially at that price. Also, why would you put 40% down? Is that to make it cash flow positive?
Re: Investment Property
Run, don't walk, from that deal.
You need to look at cash flow, with a reasonable expense ratio (1-4 residential is usually between 40-60% of gross rent), rather than relying on appreciation, which is pure speculation. Remember that housing trends with inflation over the long term. Your NOI needs to reflect an appropriate return for your leveraged investment. In my case, anything less than 10% is not worth the risk/hassle of a rental property.
Additionally, as already mentioned, I would look at multi-family properties rather than single family. You'll spread your risk over additional units, gain some economies of scale and will hopefully be buying it based on investment metrics (cap rate, etc) rather than sales comps which don't account at all for income metrics.
You need to look at cash flow, with a reasonable expense ratio (1-4 residential is usually between 40-60% of gross rent), rather than relying on appreciation, which is pure speculation. Remember that housing trends with inflation over the long term. Your NOI needs to reflect an appropriate return for your leveraged investment. In my case, anything less than 10% is not worth the risk/hassle of a rental property.
Additionally, as already mentioned, I would look at multi-family properties rather than single family. You'll spread your risk over additional units, gain some economies of scale and will hopefully be buying it based on investment metrics (cap rate, etc) rather than sales comps which don't account at all for income metrics.
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- Posts: 116
- Joined: Fri Sep 05, 2014 7:24 am
Re: Investment Property
Not a good deal, for the reasons listed above. Real estate investing is a business and needs to be treated that way. If the numbers don't work out, don't do it. The house may be a beautiful house, but it doesn't make it profitable.
If you are interested in being a landlord, there are better deals out there. Give biggerpockets.com a try. I was turned on to it through this site, and have gained a wealth of knowledge.
If you are interested in being a landlord, there are better deals out there. Give biggerpockets.com a try. I was turned on to it through this site, and have gained a wealth of knowledge.
Re: Investment Property
My answer would depend on your overall networth and how you hold your assets, and your landlording experience.
How well funded are your retirement accounts?
If you trust real estate more than banks or stocks/bonds, and you want as low maintenance as possible, a new home as a rental may make more sense than burying your money in your back yard. I know someone who wants real estate but not the hassle of being a landlord, so they buy property and hold it vacant (no need for anyone to explain to me why this is not a great idea).
Even a new home will not be maintenance or disaster free.
Even the best tenants can become nightmares midway through (such as a professional couple with excellent credit who got separated mid way through the lease and the wife who stayed in the rental had trouble paying the bills, the wife moved out after the husband and left the place half full of the belongings and mess, then the husband was demanding the deposit back. This left the landlord with a house to clean and rerent, as well as the hassle of dealing with the husband who wanted deposit back after the wife said keep it due to the condition of the place- both were on the lease).
Whatever the rental, you have to budget for expenses including taxes and repairs and unplanned vacancies, not to mention normal wear and tear and tenant turnover.
Multifamily may cover your expenses better since there is unlikely to be 100% vacancy, but you get the added hassle of more tenants and more turnover expenses and hassle of rerenting.
Are you an experienced landlord? How long have you had the rental townhome? What made you want to do this house in particular ?
Best wishes,
lafder
How well funded are your retirement accounts?
If you trust real estate more than banks or stocks/bonds, and you want as low maintenance as possible, a new home as a rental may make more sense than burying your money in your back yard. I know someone who wants real estate but not the hassle of being a landlord, so they buy property and hold it vacant (no need for anyone to explain to me why this is not a great idea).
Even a new home will not be maintenance or disaster free.
Even the best tenants can become nightmares midway through (such as a professional couple with excellent credit who got separated mid way through the lease and the wife who stayed in the rental had trouble paying the bills, the wife moved out after the husband and left the place half full of the belongings and mess, then the husband was demanding the deposit back. This left the landlord with a house to clean and rerent, as well as the hassle of dealing with the husband who wanted deposit back after the wife said keep it due to the condition of the place- both were on the lease).
Whatever the rental, you have to budget for expenses including taxes and repairs and unplanned vacancies, not to mention normal wear and tear and tenant turnover.
Multifamily may cover your expenses better since there is unlikely to be 100% vacancy, but you get the added hassle of more tenants and more turnover expenses and hassle of rerenting.
Are you an experienced landlord? How long have you had the rental townhome? What made you want to do this house in particular ?
Best wishes,
lafder