Looking for somewhere new to invest some money. How do these numbers look to those of you with experience in rental property? These houses are all located in Amarillo and are all currently occupied at the rents shown below. Is there a certain ratio of rent/cost that you look for? How much of a down payment is typically required on something like this? I would be paying a real estate company to manage this for me.

Assuming I put 25% down on a 30 yr loan at 5% interest, about 40% of the rental income ($26,000/yr) would be left for paying mgmt fees, upkeep, profit, and vacancies.

Bedroom---Bath---Sq. Ft.---Rent-----Taxes-----Insurance---Price
2------------------1-----806----$525.00--$772.91----$326.00-----$ 45,500.00
2------------------1-----760----$525.00--$604.68----$326.00-----$ 38,500.00
2------------------1-----750----$500.00--$751.85----$326.00-----$ 39,500.00
3------------------1-----828----$700.00--$803.18----$389.00-----$ 48,500.00
3------------------1-----916----$700.00--$1,004.33---$406.00----$ 51,900.00
4------------------1-----1150---$700.00--$1,112.45---$402.00----$ 54,500.00
3------------------1-----1719---$900.00--$2,429.69---$541.00----$ 86,500.00

-----------------------------------$4,550.00--$7,479.09--$2,716.00---$ 364,900.00




[This message has been edited by csp97 (edited 5/19/2013 8:49a).]

Someone else can help you with the numbers, but I'll offer my $0.02 on another aspect of your analysis: tenant profile.

With each of those houses, consider who would be interested in renting...for example, number of bedrooms. You probably won't have a family of five interested in a 1 bed house. A single man or woman might be more likely to turn over the house each year. On the flip side, a larger tenant family could cause more overall wear and tear, but be more likely to release.

I guess my advice would be to consider the numbers, but also think about what type of tenant will most likely be interested in the rental.

Only rule of thumb I have heard is to shoot for a yearly rent around 10% of the property value. Looks like yours are in the right ballpark.

csp97: Just curious, what are the normal property management % fees in Amarillo?

My personal rule of thumb is that monthly rentals less homeowner association fees should be at least 1% of the purchase price. These appear to work, on the face of it.

Nm

[This message has been edited by garlandag2012 (edited 5/19/2013 11:58a).]

I have a couple of rules I use. First the rent would need to be 1.5% of the sales/total investment price or better for me. In Amarillo, I would say closer to 1.75% to 2% because I would assume you will have little to no appreciation and possibly even deprecation. That would mean I would want a minimum rent of $5,400 a month, but would like to personally see closer to $7,000 a month, especially if you hire outside management.

My other rule when buying investment property: is the property in a location I could live in. Not my first choice or even 10th choice of neighborhoods, just is it somewhere you could live for 6 months if you HAD to.

Hmm. I just checked Amarillo real estate prices. Up 2.73% since 1983, up 2.67% last 10 years. The US average is somewhere north of 3% I believe.

Last time I used a mgmt company was several years ago in Corpus. They charged 10% per month and 50% to get a new renter. I have not checked around in Amarillo.

Sorry I do not know that market and appreciation rates, but I still stand by my 1.5% number.

AFarmer: I really like your numbers, but are they remotely reality-based? From my experience, those kind of properties are found as often as ocean front property in Arizona. If I'm wrong - tell me where they can be found, and I'll start snatching them up.

And I've been told that I'm way too conservative in evaluating properties!

I just don't want cas97 to get discouraged if he can't find any of these no-money-down unicorn farms...

Yep they are out there. You just have to be diligent about looking. Not every piece of real estate is a good investment property. In fact most aren't. Texas is hard to make any money cash flowing properties that are financed with the high property taxes.

I'm not going to say all my properties always fit that that but most have or been real close. My best deal is a property that rents for about 2.3% of my investment.