If I were to buy a house/condo to rent, what % of the sale price would I need to charge per month in order to make reasonable return on investment? Let's suppose I pay cash for the property. I know this is a stupidly basic question and incredibly simplistic scenario but it's for an argument I'm having with someone. Thanks in advance.
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Basic question regarding rental property
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Last: 7 hrs ago by NWE
Depends on what you call reasonable.
Used to, everyone considered 1% the norm for many years. I used to be able to buy 3/2s in south college station at 1.1% with some hard effort. 1.2-1.3% in Bryan. Up to over 2% for ghetto 4-plexes but of course you never actually got that.
Now days, all that's gone but I don't really know what cash buyers are settling for. Are investors even buying to hold rentals at current numbers? Im selling one of those 1300 sq/ft starters in Bryan that would rent around $1450-$1500. $230k list. Three full price offers from owner occupants in first 72 hours. No offers from investors. That would come out to 0.65%. Would make no sense with property taxes, insurance. etc the way they are.
Used to, everyone considered 1% the norm for many years. I used to be able to buy 3/2s in south college station at 1.1% with some hard effort. 1.2-1.3% in Bryan. Up to over 2% for ghetto 4-plexes but of course you never actually got that.
Now days, all that's gone but I don't really know what cash buyers are settling for. Are investors even buying to hold rentals at current numbers? Im selling one of those 1300 sq/ft starters in Bryan that would rent around $1450-$1500. $230k list. Three full price offers from owner occupants in first 72 hours. No offers from investors. That would come out to 0.65%. Would make no sense with property taxes, insurance. etc the way they are.
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Not on topic directly to OPs question.
But 85% of my deals this year have been cash closings. I've helped one couple this year buy a house. Almost all of the rest of those were investors selling their rentals or buying to rent out
The yield you see getting from rentals is stretched thin. Not sure any deals really make sense if going for yield. Even with student properties, which I think are the only ones that make the most sense (assuming unleveraged), these days are closer to 0.85%. Numbers just dont pencil.
Even my commercial clients, those guys won't buy unless it's a screaming deal and we can't find anything that isn't a "build on my own land that I've had for years". But even that now has some issues because of rates and banks not wanting to lend on real estate.
But 85% of my deals this year have been cash closings. I've helped one couple this year buy a house. Almost all of the rest of those were investors selling their rentals or buying to rent out
The yield you see getting from rentals is stretched thin. Not sure any deals really make sense if going for yield. Even with student properties, which I think are the only ones that make the most sense (assuming unleveraged), these days are closer to 0.85%. Numbers just dont pencil.
Even my commercial clients, those guys won't buy unless it's a screaming deal and we can't find anything that isn't a "build on my own land that I've had for years". But even that now has some issues because of rates and banks not wanting to lend on real estate.
1%
It can be done with cash. Just get on investor lists.
It can be done with cash. Just get on investor lists.
EDIT: This is my first experience in purchasing an investment property. I have a lot to learn.
I want to purchase in the next 12 months and rent out until my kids go to school there. I'd be financing.
If I'm understanding this thread correctly, it would be nearly impossible to finance a home and make enough from rent to cover my mortgage at current prices?
What are some other good ideas to get in the market year ahead of a family member utilizing the property? I see it as dual purpose. If my kids don't go to school there, I would either keep renting it out if it was a nice passive stream, or sell it.
Are foreclosures still a good way to go if I had time and money to fix it up a bit?
I want to purchase in the next 12 months and rent out until my kids go to school there. I'd be financing.
If I'm understanding this thread correctly, it would be nearly impossible to finance a home and make enough from rent to cover my mortgage at current prices?
What are some other good ideas to get in the market year ahead of a family member utilizing the property? I see it as dual purpose. If my kids don't go to school there, I would either keep renting it out if it was a nice passive stream, or sell it.
Are foreclosures still a good way to go if I had time and money to fix it up a bit?
I'd wait a year or two. Think you will get much better pricing.NWE said:
EDIT: This is my first experience in purchasing an investment property. I have a lot to learn.
I want to purchase in the next 12 months and rent out until my kids go to school there. I'd be financing.
If I'm understanding this thread correctly, it would be nearly impossible to finance a home and make enough from rent to cover my mortgage at current prices?
What are some other good ideas to get in the market year ahead of a family member utilizing the property? I see it as dual purpose. If my kids don't go to school there, I would either keep renting it out if it was a nice passive stream, or sell it.
Are foreclosures still a good way to go if I had time and money to fix it up a bit?
We're on pause. We are cash buyers & didn't pick up anything in 2024. We can't make the numbers work anymore. Prices have increased significantly & our area's rents are fairly stagnant. There are no super high paying jobs here & no college students. Houses that we looked at last year were priced higher than ever & still needed renovation to get top of the market rent. We've had a pretty big influx of out-of-staters & TX urbanites moving in because everything is cheap to them. They are coming in and fixing up some real eyesores - beautiful historic properties - to homestead which is good for our existing properties, but not for new purchases.
Our goal has always been to get purchase price & renovations back in 5-7 years. That's always worked for us in the past but not now. Currently, we are looking at 10-15 years just to get our money back & we're getting too old for that. That said, we used to buy really cheap houses in great neighborhoods that needed everything & did 90% of the work ourselves, so it was doable. Glad we started in 2015 but really wish we had started in 2008...
Our goal has always been to get purchase price & renovations back in 5-7 years. That's always worked for us in the past but not now. Currently, we are looking at 10-15 years just to get our money back & we're getting too old for that. That said, we used to buy really cheap houses in great neighborhoods that needed everything & did 90% of the work ourselves, so it was doable. Glad we started in 2015 but really wish we had started in 2008...
FIFY?schwack schwack said:
Glad we started in20152025 but really wish we had started in20082019...
NWE.....As others have mentioned the purchase price vs rent situation right now isn't as attractive for real estate investors as it used to be when you could do some work and find those 1% deals. Putting your kids in there creates some questions you might ask yourself. Am I a real estate investor and my kids will simply be normal tenants or am I a student parent looking/hoping to minimize overall living costs/outlays to put my kids through school and hopefully get some good price appreciation over time when you sell at the end of the kids time there.
-Will there be roomates and can the roomates rent cover the property, taxes, insurance, maint and repairs so you aren't "losing money" on a yearly cash flow standpoint if you don't charge your kids rent. Or will you charge your kids rent like anyone else and have a reasonably positive cash flow treating your kids as "renters". Will your kids really pay you rent or are you moving money from their college fund to your operating account to pay their rent or does no money change hands for your kids as if they live there for free? (The IRS may not like that so much depending on how you treat the property for tax filing purposes.)
Just some things to think about that make is slightly different than a straight real estate investor. Bought a place in BCS for my two kids in 2017 that met the 1% target. Similar units are selling for 75% more than I paid for it right now so overall it has been a good deal. Depends how you want to treat your lost opportunity costs on the money you paid for the property.
-Will there be roomates and can the roomates rent cover the property, taxes, insurance, maint and repairs so you aren't "losing money" on a yearly cash flow standpoint if you don't charge your kids rent. Or will you charge your kids rent like anyone else and have a reasonably positive cash flow treating your kids as "renters". Will your kids really pay you rent or are you moving money from their college fund to your operating account to pay their rent or does no money change hands for your kids as if they live there for free? (The IRS may not like that so much depending on how you treat the property for tax filing purposes.)
Just some things to think about that make is slightly different than a straight real estate investor. Bought a place in BCS for my two kids in 2017 that met the 1% target. Similar units are selling for 75% more than I paid for it right now so overall it has been a good deal. Depends how you want to treat your lost opportunity costs on the money you paid for the property.
Yeah you got it. I see the dual purpose to be a plus plus if I can get price appreciation in the years leading up to using it for my kids.
In my head it makes sense to rent it out and get friends to pay. Would love to tell you I'd have my kids pay rent but probably won't tbh haha
In my head it makes sense to rent it out and get friends to pay. Would love to tell you I'd have my kids pay rent but probably won't tbh haha
Everyone Ive known that has done it has come out ahead. You might not do as well as someone who did it 10 years ago but numbers wise, its still going to be better than paying a bunch of rent for four years and getting nothing back. You just have to decide if the benefit is worth the effort/ potential for drama.
One thing to watch out for is being realistic of your kids taste. The property that might make the best rental, might not be a place that your wife or student can see themselves living.
One thing to watch out for is being realistic of your kids taste. The property that might make the best rental, might not be a place that your wife or student can see themselves living.
Good advice. I've considered the idea that I'm purchasing within my current budget and that could change by the time my kids go there. I might not want them to live in this place.
I have three kids ages 11,8,&4. I did the back of napkin math and IF all three went to A&M it could be 11 consecutive years I'd have someone living down there. That was what sparked this idea to begin with.
I want to be as practical and realistic with my expectations as possible.
I have three kids ages 11,8,&4. I did the back of napkin math and IF all three went to A&M it could be 11 consecutive years I'd have someone living down there. That was what sparked this idea to begin with.
I want to be as practical and realistic with my expectations as possible.
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