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.
Post Reply
1 of 1
Basic question regarding rental property
4,396 Views |
34 Replies |
Last: 18 days ago by scrap
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.
Red Pear Luke (BCS)
Joined:
May 20, 2021
Posts:
2,296
User Profile
Private Message
How long do you want to ignore this user?
Sponsor
AG
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.
Thank you for all the replies and advice from y'all's experience.Martin Q. Blank said:
1%
It can be done with cash. Just get on investor lists.
So…simply put, I need to be able to rent it for 1% of the purchase price per month if I pay cash?? So….a $300k house needs to rent for $3000?
that's the idea. Good luck with that
Yes, much easier on the lower end. $200k house for $2000/mo or $150k house for $1500. As CS78 indicated early on, you can get into the "ghetto" market and get higher yield, but then you're dealing with tenants you may not want to deal with.newbie11 said:Thank you for all the replies and advice from y'all's experience.Martin Q. Blank said:
1%
It can be done with cash. Just get on investor lists.
So…simply put, I need to be able to rent it for 1% of the purchase price per month if I pay cash?? So….a $300k house needs to rent for $3000?
$2000/mo market has the highest yield and you can easily screen good, long term tenants. This is a purely "yield" goal. Other markets are buy and hold with the goal of the house appreciating, but you get lower rent to purchase price ratio.
We did pretty much exactly what you are thinking. We purchased in 2015 but were looking for 18 months before and had to adjust our budget plus what we were looking to buy. Originally, we thought a 3/2 home was what we wanted but found out those were what everyone else was looking for too at that time. We ended up getting a 4/3 and kept the existing tenant until our eldest finished HS. We now have our 3rd and final kid with one year to go. It has definitely worked out for us but like a few has stated values have increased about 40% from 2015. We have made it work and never been out of pocket much more than our kids' part of the utilities and such.NWE said:
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.
We will be making a decision on whether or not to keep it or not when the final kid graduates. We would love to have the home as a family meeting place for games and such but we shall see.
So hard to get 1% right now in college station but possible if you find something off market or under rented. But there's still deals to be found in other markets. I just closed on one today for $185k that will rent for $2200. But it won't appreciate like houses here in town.
Hold Up AGs. This exact situation is what I went through in 2003 and I will bring it back to 2024 to make it relevant. This has become my PASSION!!!!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?
I got involved in INVESTMENT real estate in 2003, SIMPLY to save money from paying dorm fees. I bought a DUPLEX (3 bedrooms 2 bath each side). My son had two roommates paying $325 each and 3 girls on the other side paying $900 total. I was NERVOUS as hell so I put down $46k on a $146k purchase. My total monthly cost was $1000 and I was bring in $1525 with my son living free. My son stayed for a Master's Degree and his sister joined him on the other side with two of her roommates at $325 each. So I was bringing in $1300 monthly and my expenses were $1000. So I'm making $300 positive and my kids living for FREE.
That was then, here is now. As a result of that first INVESTMENT property, I now own 20 units and loving life. Still own that first duplex in Bryan TX. Hold up Joe (that's Me), that was then, can't do that today!!! I say Bull Sheet!!!!!
In May of 2024, Less than a year ago, I bought a duplex in Bryan, with cash only because I don't need loans anymore. I would recommend using leverage for first time investors. No renovation needed, rented as is!!!!
Sale price 280k. Rents total $2740 monthly, close to VET school and main campus. JUST under the 1% rule. Yes, not as good as it was in 2003 but COME ON guys, take any 20 year period and it will ALWAY BE BETTER looking back!!!
Now here is the SECRET SAUCE!!!!!
1. Don't buy a SFH! Listen Up!!!! Don't buy a SFH (Single Family Home).
2. Do buy a DUPLEX. Do buy a DUPLEX if your a first time REAL ESTATE INVESTOR. If you are more EXPERIENCED, don't be afraid to buy a TRI-PlEX or Four Plex.............BUT DON'T BUY A SFH!!! JUST DON'T.
3. If you are looking in the BCS area, favor Bryan and close to the campus and when you look back 20 years you will smile and say man o man my real estate INVESTING has come a LONG WAY!
For LONG TERM investors, it is all about CASH FLOW!!!!
CASH FLOW is....................KING!!!!!!!
Lastly, by doing this and letting your kids help manage your property, finding their friends as roommates and passing some responsibilities to them, they are learning very important life skills.
My son now owns 2 duplexes and my daughter own one duplex and one SFH rental that her husband owned before marriage.
Full disclosure, I am neither a real estate agent or lender. I have no conflict of interest I just tell it as it is.
Good Luck Ags and as always...........Cheers!
Gig'Em
Class of 77
Love the energy. Do you/did you use a particular realtor?
Because of my experience, I have usually negotiated directly with the listing agent. It puts me in advantage, but the new MLS rules may not be as advantageous. I know a good investment real estate agent in the BCS if you need one.
If you want to discuss more real estate investing DM me your number and we can talk on the phone.
Joe
If you want to discuss more real estate investing DM me your number and we can talk on the phone.
Joe
Scrap has tons of great advice!
I'm getting about .004 on my last rental purchase.
I just want to stop talking about it and get my first one. I might not get rich from it, but I think I'll learn a lot from just starting and then use those learnings to adjust my approach. OR maybe I'm naive and I'll lose all my money on it. Who knows.
I will add that the in uptick in property taxes and insurance really impacts the returns.
Are foreclosures still an option for finding a decent investment? Or is that not something that's as common as I recall people discussing in the past?
The few times I've looked at foreclosures, I found a better deal somewhere else. Maybe I had bad luck, but the banks I dealt with wanted market price for a dump.NWE said:
Are foreclosures still an option for finding a decent investment? Or is that not something that's as common as I recall people discussing in the past?
I've heard this before. Doesn't seem like a great way to get a good deal.
Bringing this back up as I'm in the market to buy in BCS.
Two questions:
Do we anticipate there will be more supply due to the university calling admissions over the coming years?
I saw several Barracks condos for sell as well as that same group building not far from that. Isn't it harder to sell these since there are so many like it?
Two questions:
Do we anticipate there will be more supply due to the university calling admissions over the coming years?
I saw several Barracks condos for sell as well as that same group building not far from that. Isn't it harder to sell these since there are so many like it?
On the advice of both buying a SFH, can you elaborate why?
Is it yard maintenance, cost of replacing the A/C, potential roof issues?
Is it yard maintenance, cost of replacing the A/C, potential roof issues?
Comeby! said:
Bringing this back up as I'm in the market to buy in BCS.
Two questions:
Do we anticipate there will be more supply due to the university calling admissions over the coming years?
I saw several Barracks condos for sell as well as that same group building not far from that. Isn't it harder to sell these since there are so many like it?
Comeby - I am Pre-selling Phase 1 of my new construction townhome development. They will be ready Summer 2025/as this current spring semester winds down and certainly before Fall semester starts, so we are writing contracts now.
All units have 4 bedrooms, 4.5 bathrooms, a 2-car garage, and a fenced in rear yard & patio area.
One of the only townhome opportunities offering both a garage and fenced-in rear yard/patio area that is new construction.
All of that for $206/SF putting the sales price at $425k.
PM me and others are welcome to do so as well.
If you're going to do student rentals, then look for something with staying power. Even if the market softens, you wont have trouble leasing because you have something desirable.
Examples being- inside 2 miles of campus, single family vs multi, 3 bedrooms or less. The softest properties would be a 4 bedroom multifamily designed for students, but far from campus. If the student market gets soft, theyll be the last to lease. And it'll be tough to find a family to take up the slack.
Examples being- inside 2 miles of campus, single family vs multi, 3 bedrooms or less. The softest properties would be a 4 bedroom multifamily designed for students, but far from campus. If the student market gets soft, theyll be the last to lease. And it'll be tough to find a family to take up the slack.
I like single family because-Comeby! said:
On the advice of both buying a SFH, can you elaborate why?
Is it yard maintenance, cost of replacing the A/C, potential roof issues?
The student tenants tend to be older, more stable, and more mature and less interested in social life. Its like there's a progression where they start off on campus, move to an apartment, then move to a house. You get less partying. You want to see a drama filled landlord experience, go buy a multifamily, 4 bedroom near Blinn. Someone always has a reason they have to move home.
Less drama with other owners when people aren't packed in as tight.
More favorable loan terms depending on type of loan.
Much easier to rent to family in the event that you dont get it leased to a student.
Easier to buy at a discount due to a larger supply.
Much easier to sell, if you need to. Larger buyer pool.
Buying and selling mutlifamily, is a pain in the arse. You're always dealing with other experienced investors trying to outmaneuver each other.
Easier to expect the tenants to cover yard maintenance, pest, etc. The less bills I have to keep up with, the better.
It is mainly CASH FLOW.Comeby! said:
On the advice of both buying a SFH, can you elaborate why?
Is it yard maintenance, cost of replacing the A/C, potential roof issues?
Too much to type out but if you want to discuss I would be happy to share on a phone call.
DM and I can talk you through the advantages of duplex investing over SFH.
Cheers.
Thank you. Will PM.
You may be correct if you are comparing SFH to a large 3/4 bedroom 3/4 bath duplex.CS78 said:I like single family because-Comeby! said:
On the advice of both buying a SFH, can you elaborate why?
Is it yard maintenance, cost of replacing the A/C, potential roof issues?
The student tenants tend to be older, more stable, and more mature and less interested in social life. Its like there's a progression where they start off on campus, move to an apartment, then move to a house. You get less partying. You want to see a drama filled landlord experience, go buy a multifamily, 4 bedroom near Blinn. Someone always has a reason they have to move home.
Less drama with other owners when people aren't packed in as tight.
More favorable loan terms depending on type of loan.
Much easier to rent to family in the event that you dont get it leased to a student.
Easier to buy at a discount due to a larger supply.
Much easier to sell, if you need to. Larger buyer pool.
Buying and selling mutlifamily, is a pain in the arse. You're always dealing with other experienced investors trying to outmaneuver each other.
Easier to expect the tenants to cover yard maintenance, pest, etc. The less bills I have to keep up with, the better.
However you left out a space from apartment then to a house. Are you equating apartment as multi-family. Seems right but let's qualify. There is a huge difference moving from campus to apartment vs a small 2 bedroom duplex.
For all the reasons you listed for advantages of a SFH, are GREAT and apply even better to a 2 bedroom duplex.
Here is WHY! If your target is Grad Students, VET students, Medical Students .........which ARE THE BEST TENANTS in BCS, student or not, a SMALL duplex is their best choice. Mainly because of PRICE and NEED. Usually you are looking at a single student or a couple (either married or friends of sort). They DON'T need a 3 bedroom and they would rather pay less as MONEY IS TIGHT. They want less drama, which means less roommates! Although they might like the idea of an extra bedroom, they would rather NOT PAY FOR IT.
These students realize that this journey is just the beginning; they are not going to be living in their dream home while being educated.
The biggest mistake newbie investors make is buying a property they would live in and not thinking about the wants and needs of their tenants. I am 69 yrs old. I would not live in one of my duplexes now but I certainly would when I was attending college. Honestly, I would live in one of my duplexes, but my wife wouldn't so that knocks me out, LOL.
Lastly selling. Much easier to sell SFH. Hogwash. Duplexes are HOT!!!!!!
This property along with two others were listed 2 days ago in Bryan, CLOSE TO CAMPUS and is PENDING after having multi-offers. Check it and see.
https://www.realtor.com/realestateandhomes-detail/808-Frio-Cir_Bryan_TX_77801_M77956-20724?from=srp-list-card
https://www.realtor.com/realestateandhomes-detail/3914-Olive-St_Bryan_TX_77801_M80141-96850?from=srp-list-card
Here is the exact floor plan of the first duplex to show how it could look. This is one of my units that is furnished for a different target market in Bryan. BTW in the same neighborhood as the first lising.
https://www.furnishedfinder.com/property/374983_1
Cheers.
Featured Stories
See All
25:48
1h ago
1.5k
17:09
2h ago
1.6k
Baseball Thoughts: Challenging week ended with an important exhale
by Ryan Brauninger
18:53
2h ago
2.0k
Michael Earley joins TexAgs Live to recap A&M's showing at Daikin Park
by Ryan Brauninger