• Our developer will be working on RCF over the next few weeks. Things may look wonky at times, normal functions may not work or dissappear completely. It's the nature of the beast but we'll try to make sure this is painless as possible.

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The Wizard of Moz

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For comparison, the property I posted above is $340k and rents for $3800 ($1900 a side). Of course I've never been in the areas/seen either property to compare.
Goodness dude the Richmond market must suck because if I found something like this I'd have bought it yesterday. Seriously this is one of the best rent/mortgage deals I've found in Richmond. Maybe it's just an overpriced city?
 

The Wizard of Moz

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Not knowledgeable enough to say where you should go, but seen some great bang for your buck in Texas, indiana and even lesser areas of ohio.
But I don't live in these places :(

Do you think it would be more worthwhile to have a property owner in a place with better real estate value than to have a place in the city I'm living in?
 

Zog

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Goodness dude the Richmond market must suck because if I found something like this I'd have bought it yesterday. Seriously this is one of the best rent/mortgage deals I've found in Richmond. Maybe it's just an overpriced city?
No idea. See if you can get into some Richmond REI classes/groups and see what people suggest for your area and if that is reasonable. Every area is different and has pros/cons. I would think anywhere that is on the coasts is probably going to have less cash flow and higher price, probably better appreciation in value (broad generalization obviously).

As @Lee pointed out, Indy is a really cheap place to buy a house that you can rent for $800. I've looked at Indy only because I'm hoping to get a job interview there soon, same with Columbus. I've read a little about Indy and you really need to know the areas though apparently, because there is not necessarily one area that is the "hood" but rather one block may be the hood and the next fine, and it is very scattered. So you have to know what area you are investing in and wouldn't want to do it from afar.

I think the biggest issue I would have with the property you are looking at it is the historic designation of it and what that means for maintenance costs and requirements.

If it allows you to live for free and something you are willing to keep long term (even after you leave) it's probably worthwhile. Just realize if you sell it for $400k in 5 years and use a Realtor, you're probably out about $25k in realtor commission. So how much is the mortgage going to be paid down by then? Would it even be worth it?
 

Lee

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But I don't live in these places :(

Do you think it would be more worthwhile to have a property owner in a place with better real estate value than to have a place in the city I'm living in?
Living in your rental is different, and i really am not an expert in owning. I finance them, there are better people than me for this subject except the financing part.
 

The Wizard of Moz

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@gourimoko @bob2the2nd @cavsfan1985 @getBUCKED

I know this is an extremely general question that likely fluctuates month to month and that it could be dominated by one big expense that occurs every so often, but can you give me either:

1. an estimate of the percent of your monthly rent inflow that is used on repairs
2. an estimate of annual repair costs

1 is preferable to 2.
 

FiveThous

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@gourimoko @bob2the2nd @cavsfan1985 @getBUCKED

I know this is an extremely general question that likely fluctuates month to month and that it could be dominated by one big expense that occurs every so often, but can you give me either:

1. an estimate of the percent of your monthly rent inflow that is used on repairs
2. an estimate of annual repair costs

1 is preferable to 2.
Don't they say you should set aside 2-4% annually ofthe purchase price of the home for repairs? This may not be the exact answer you're looking for but if I'm reading it correctly, I think I'm close.
 

getBUCKED

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@gourimoko @bob2the2nd @cavsfan1985 @getBUCKED

I know this is an extremely general question that likely fluctuates month to month and that it could be dominated by one big expense that occurs every so often, but can you give me either:

1. an estimate of the percent of your monthly rent inflow that is used on repairs
2. an estimate of annual repair costs

1 is preferable to 2.
I fuck around with this calculator for fun when looking at properties. It's not perfect, but can give a general idea how good of a deal you're looking at. A good rule of thumb is you want your total monthly rental income to be 1% of your purchase price (2% rule is ideal, but not practical in most markets). In addition, estimated total expenses typically comes out to be around 50%. Based on this, I don't think the $389,000 multifamily only bringing in $2,520 will be cash flow positive, but you would still building equity.

Are you working with a realtor that is giving you MLS listings? The #1 takeaway I've learned from REI podcasts/research is that you make your money when you buy, so finding the deal is the most important, and hardest step.
 

The Wizard of Moz

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In addition, estimated total expenses typically comes out to be around 50%.
of the purchase price of the house?

Are you working with a realtor that is giving you MLS listings?
Meeting with a realtor tomorrow. Honestly it's really hard to find a place adheering to that 1% rule in Richmond. Believe it or not this has been one of the best income producing per price place I've found.

How much do you usually increase rent annually? If I can increase rent 2% annually then it's a very profitable house over the long run.

Assuming $4,000 per year in repairs (just over 1% of purchase price, found that metric when searching for what FiveThous said) I would have a -104 CF until July when I could raise rent on the 4 bedroom by 2% then I'd be red 54 per month.

However in 2027 assuming the 2% rent increase per year I'd be netting $678 per month with $190,000 of equity built (assuming 2% annual increase in home value and no more housing bubbles lol). That's pretty good for an initial investment of $27K (I'm putting 7% down). My cumulative net CFs to that point would be around $33,000.
 

getBUCKED

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of the purchase price of the house?


Meeting with a realtor tomorrow. Honestly it's really hard to find a place adheering to that 1% rule in Richmond. Believe it or not this has been one of the best income producing per price place I've found.

How much do you usually increase rent annually? If I can increase rent 2% annually then it's a very profitable house over the long run.

Assuming $4,000 per year in repairs (just over 1% of purchase price, found that metric when searching for what FiveThous said) I would have a -104 CF until July when I could raise rent on the 4 bedroom by 2% then I'd be red 54 per month.

However in 2027 assuming the 2% rent increase per year I'd be netting $678 per month with $190,000 of equity built (assuming 2% annual increase in home value and no more housing bubbles lol). That's pretty good for an initial investment of $27K (I'm putting 7% down). My cumulative net CFs to that point would be around $33,000.
How are you finding your listings? When you meet with the realtor, let them know you want automatic MLS (multiple listing service) alerts to come to your email based on your parameters. You will get an alert the moment a house is listed for sale, while many websites are delayed (and thus the deal is gone).

50% rule is on your rental income, not purchase price. Annual rent increases depends on the market more than anything. It's easy to optimistically assume, but you have to be realistic as well. Are you taking into account PMI, taxes, property management if you go that route, etc.?

Keep in mind I have no personal experience, this is just what I've learned from BP, podcasts, etc.
 

gourimoko

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@gourimoko @bob2the2nd @cavsfan1985 @getBUCKED

I know this is an extremely general question that likely fluctuates month to month and that it could be dominated by one big expense that occurs every so often, but can you give me either:

1. an estimate of the percent of your monthly rent inflow that is used on repairs
2. an estimate of annual repair costs

1 is preferable to 2.
1) Less than 5%, for certain.

2) That's a good question; I'd say.. not much; but I haven't been hit with anything extreme. I know people who have come out of thousands for plumbing issues though.
 

Zog

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How are you finding your listings? When you meet with the realtor, let them know you want automatic MLS (multiple listing service) alerts to come to your email based on your parameters. You will get an alert the moment a house is listed for sale, while many websites are delayed (and thus the deal is gone).

50% rule is on your rental income, not purchase price. Annual rent increases depends on the market more than anything. It's easy to optimistically assume, but you have to be realistic as well. Are you taking into account PMI, taxes, property management if you go that route, etc.?

Keep in mind I have no personal experience, this is just what I've learned from BP, podcasts, etc.
Not arguing with you, but just from reading that article, where the hell do people find houses that rent for $1200 a month that are available to be purchased for $60k? Where do I sign up for that? Even if I'm only netting $500/month on that purchase after taxes and expenses (if bought in cash), that's a 10% ROI. If I get lucky and have a good tenant for 2 years and don't have any major repairs, it's probably a 30% ROI in 2 years.
 

The Wizard of Moz

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1) Less than 5%, for certain.
Yeah honestly the 50% rule mentioned seems way, way overly conservative. I mean that's $15,120 per year. Over the 30 years that literally would be more in repairs than the purchase price by $50,000.

How are you finding your listings? When you meet with the realtor, let them know you want automatic MLS (multiple listing service) alerts to come to your email based on your parameters. You will get an alert the moment a house is listed for sale, while many websites are delayed (and thus the deal is gone).
Just been using Zillow. Will do.

It's easy to optimistically assume, but you have to be realistic as well.
The US average has been holding steady at 3% rent inflation for a while. Richmond specifically has been a tad over that lately. I don't think 2% is overly optimistic or pessimistic. Plus the 4 bedroom is currently renting for 1600. $400 per person for this location is really a steal. There are 2 bedroom apartments on the same street going for 1600. Now that obviously comes with a pool and a gym, but there are advantages to the house as well. Off street parking (an extra $100 per month per person at the apartment mentioned), mail delivered right to house, fenced in yard, privacy, more space for memes. I really was shocked to hear that it was renting for $1600. Especially since the 1 bedroom is renting for $925

Are you taking into account PMI, taxes, property management if you go that route, etc.?
Everything but property management since I would be living there at first and doing it myself.



Does anyone know if there's a website where I can export home prices and number of bedrooms to excel? Would be really helpful to filter some things.
 

The Wizard of Moz

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Not arguing with you, but just from reading that article, where the hell do people find houses that rent for $1200 a month that are available to be purchased for $60k? Where do I sign up for that? Even if I'm only netting $500/month on that purchase after taxes and expenses (if bought in cash), that's a 10% ROI. If I get lucky and have a good tenant for 2 years and don't have any major repairs, it's probably a 30% ROI in 2 years.
Yeah, I think the 2% rule is insanely optimistic, but if you can find that buy it without even thinking twice.

For shits and giggles I used my same setup: 2% home appreciation for year, 1% of purchase price per year in repairs, 2% rent increase per year. But then changed the initial rent income to be 2% of the purchase price.

It ended up with an initial rent of $7,780 per month (about 3 times the amount it is, and around 1550 per month per person, waaaaay over what a 1 bedroom in richmond goes for let alone a 4)

The total net incomes of the house over 30 years were 2.9 million dollars. That isn't including the value of the home you've paid off. That isn't including the value of the appreciation of the home. That is literally just the net cash flows summed up.

Seriously if anyone finds a house abiding by the 2% rule tell me and I will buy it today
 

getBUCKED

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I mentioned in an earlier post the 2% rule is really not realistic in most US markets. You have to invest in undesirable neighborhoods or live in a low COL region with a good economy, which is extremely rare now that the housing market has rebounded. That's why I think 1% is more realistic, and even those deals are hard to come by in desirable neighborhoods.
 

cavsfan1985

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I mentioned in an earlier post the 2% rule is really not realistic in most US markets. You have to invest in undesirable neighborhoods or live in a low COL region with a good economy, which is extremely rare now that the housing market has rebounded. That's why I think 1% is more realistic, and even those deals are hard to come by in desirable neighborhoods.
I agree the 2% is hard to always get unless you are making improvements to your home. Also, the value of a long term ternate is so key to cash flow. Even if you could get 3-5% increase year over year, typically it is with a new tenant. From my experience you usually have a gap of 20-30 days between renters if not more. It is tough to get someone lined up to move out last day of the month then have someone move right in. You usually have some things you have to do the place before it is ready. Paint, clean carpets etc.

If you have a place that rents at 500 month, and you lose a half month rent every time you change over tenates.

$250 in revenue loss per change or $20 a year. You would have to raise your rent by 4% to just break even with the next renter.
 

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