i know this question is too general, because it depends on a lot of things, like the interest on the mortgage etc…
since there are many investors here on this forum from all around the US, my guestion to everbody is:
where do you invest? and if you put down 10k on a 100k property in the location where you invest, what kind of cashflow do you expect to receive? what interest do you pay on your mortgage to get this kind of cashflow?
In my area of Ohio, if you put down 10K on a 100K property (with a market value of $100K), you would be losing money and out of business in a very short period of time.
In fact, since the vast majority of newbies fail in every market, the average cashflow in every market is negative!
If you want to succeed, you should be buying rental properties at a BIG discount and including all the expenses in your cash flow analysis.
Good Luck,
Mike
They do not have any properties for 100K in my area, except for actually trailors… And the lot rents are over 500 a month…So negative here too…My market, want to cashflow even on a deal for rental…Put down 60% and you will get cashflow…
Just to be clear, you can get cash flow in Ohio, just like the vast majority of the rest of the United States (red states, that is). However, you MUST buy property at a BIG discount if you want to have a positive cash flow. It is certainly not going to happen if you have a mortgage at 90% of the market value.
Mike
Of course you can find good deals in the red states because most of them are economically depressed.
Despite your partisan view, your assumption is incorrect. If anything the Red states are generally doing better. The South and the West (minus the coast) is doing the best. The, generally, stagnant parts of the country are the old Democratic bastions. Unfortunately, the old industrial states are stuck in a quagmire. Their industries are fleeing high taxes, unions, lawsuits (although that is a very American thing these days), and regulations. This leaves them with more poor people needing help. The extra poor people vote in politician whom promise them even more various types of government handouts or protections (i.e. regulations). The extra costs eventually cause the rise of taxes, generally levied on businesses or those whom are considered wealthy. The higher taxes and more regulations in turn drive more businesses (and some of the evil wealthy people whom ironically are paying the vast majority of the taxes) away leaving an even greater proportion of poor people to be taken care of by the state… And the cycle continues…
This has already been studied before. High property prices are more due to regulations than anything else, something blue states excel at. Regulations on land use. What you can and cannot build. How high or densely you can build, the more densely you can build the more people can share the price of a piece of land. Regulations taking large tracks of land out of use for either clear spaces, environmental protection, etc. Regulations on how many people can live in a particular place, even willingly. Regulations protecting deadbeat tenants. Cash needed to deal with various lawsuits that may arise during construction. Extra building costs do to unions pushing up the cost of doing business for builders. etc. etc. etc.
I am finding in the Atlanta market it’s very difficult to find much that will cash flow when fully financed, at least if you want to stay in good neighborhoods.
A quad in Alpharetta sells for $400,000 but rents for about $3,000. Ouch. It’s nearly impossible to buy these at a discount.
A SFD in Decatur might run you $100K (when discounted), and you might get $900/month in rent. That’s marginally better.
You can certainly go into the city and find quads for $100K that need repairs and get cash flow from them, but these neighborhoods are a little dangerous.
I am now looking into markets like Conyers and even Macon, where rents are at least 1% of the property’s value (and even closer to 1.5% in Macon). I’ve seen properties in Macon where the tenants have been in the same unit for 20 years. These are people with stable families and jobs…good folks. Some people are just brought up taught that you rent…God bless 'em.
These rents are not as tasty as I’ve heard about elsewhere on the board, but they’re a start.
the real challenge is prices for residential real estate have shot up over the past 5 years but rents have only moved modestly. I see over and over how landlords looking to sell love to tell you have its a great investment and income property (for them) and have great long-term tenants. What they forget to tell you is they have not raised the rent in 5 years, but some how think that their duplex/multi-family is worth 50% more than it was 5 years ago. Invariably it means you have a GRM of >150 which translates into a cash consuming monster.
Gross rental multiplers (and thus cash) flow is driven by many things but ultimately in employment situation as well as how competition there is to purchase these properties.
Sammydy
Your scenario describes the state of Ohio, Indiana, Mo, Ms, Ks Wv. Dakotas and the rest of the Midwest perfectly. Sorry to burst your bubble ,but those are all Red states. I suggest you look at a map of the US and locate the Blue states. They are on the East and West coasts and to the North. ie California, Wa, Or., Mass, New York, Vt. etc Demographically, Blue states are economically prosperous, well educated, cosmopolitan, socially progressive, attract a high percentage of college degreed professionals, are cultural meccas and home to world class cities such as New York, Los Angeles, San Francisco , Chicago , Seattle, Boston , etc. Mostly demand , not regulations is what drives real estate prices up as evidenced in the above cities.
You spoke of high taxes , high unemployment, excessive government regulations on businesses etc as factors which drive companies , jobs and the young, well educated out. Bingo!! You just described Ohio to a “T” - a Red state. This state has literally been run into the ground ever since Republicans took control over a decade ago. We are now the third highest taxed state in the nation , have a host of archaic and business unfriendly laws and regulations, and I won’t even begin to comment on the magnitude of other problems this state now faces. They are too numerous to list here.
On the flip side, Red states typically attract and retain the uneducated, socially backward , bigoted, conservative, and economically depressed therefore, depressing the real estate market as well.
Of course, there are exceptions to this as seen in the West as people move to places like Arizona and Nevada for the climate and jobs etc… but, as more of the young educated locate there, you will see a shift in the political climate as they become more blue.
Nevada is way overbuilt right now and prices are going to keep dropping there (especially in Las Vegas). Arizona has also seen it’s time so people are migrating to New Mexico. You can buy a 4-plex in Albuquerque for $200k and get $400 positive cash flow a month. I’ve got several which do quite nicely and only put 10% -20% down.
TARealty,
Your scenario describes the state of Ohio, Indiana, Mo, Ms, Ks Wv. Dakotas and the rest of the
Regulations aren’t necessarily only due to being a Red or Blue state. It also tends to happen over time as its rare for governments to go back and streamline old laws while adding new laws always makes it look like you are doing something. However the Dems, generally, favor policies that inevitably lead to more regulations so their states, in general, are pretty onerous in a fair comparison. As for your examples I cannot speak for every single one since I have not been to them; although I doubt you have either since they are filled with those nasty, backward, uneducated bigots. Those states’ peoples are not good enough for you, so why would you visit or even bare to think of them without your nose up in the air. Also, Ohio goes either way, thats why its a battleground state; Reps were in control and now the Dems are. MS is just a recent Red state convert; they were Blue state back in their bigoted past. WV is still considered a Blue state, although that may be changing. Also most of your examples suffer from a lack of natural resources for industry, lack of population, and/or are suffering from changes in their old industries.
Midwest perfectly. Sorry to burst your bubble ,but those are all Red states. I suggest you look > at a map of the US and locate the Blue states. They are on the East and West coasts and to
the North. ie California, Wa, Or., Mass, New York, Vt. etc
All of whom are successful in certain areas due to the luck of history, geography, natural resources, or old industries. Whether that luck is able to hold up against a tendency towards bad policies will depends on the particulars of each situation. CA already has long term growing problems, mainly due to the growth in government and onerous regulations. WA and OR I do not know much about so I cannot say, although it would not surprise me if the old western libertarian spirit may very well be keeping Blue governments there from going too far. New York is only successful in the city (and the immediate surroundings) and until those evil Rep mayors took over 13 years ago the city was well on its way towards becoming another dead city like so many innumerable Democratic bastions such as Newark, Camden, Detroit, etc. As far as the, generally Blue, north east and mid west goes they have by in large been losing population and industries for several decades.
Demographically, Blue states are
economically prosperous,
Where the prosperity exists it is more due to a city or area whom through the luck of history managed to survive the severe losses in industries that hit blue states particularly hard; mainly due to them being the old industrial center of the country; built at a time that blue didn’t mean what it means today.
well educated,
Old industrialize part of the country. People generally had more income to send their kids to college and it has been something of a tradition in those areas. Also the old rich families come from there since they generally made their money on the industrial revolution. And most of the old colleges and universities were in this old industrial part of the country. And the South, which at least in the past had the highest percentage of uneducated people just recently turned Red from Blue. Guess all those uneducated masses flocked there overnight and turned them Red. Of course the blue states would have a better educated populace, at least at the moment.
cosmopolitan,
First this is very subjective. Besides which port towns (or airport travel hubs these days), much of the old north east, are always cosmopolitan simply due to the movement of peoples.
socially progressive, attract a high percentage of college degreed professionals,
Judging by you, apparently snooty, arrogant, and bigoted as well.
are cultural meccas and
Wow, you really have a pretty high opinion of yourself. As far as cultural meccas go that is a very subjective standard. Although I submit to you that practically any southern area is likely to value their culture and history more than the blue crowd on the coasts, generally.
home to world class cities such as New York, Los Angeles, San Francisco , Chicago , Seattle, Boston , etc.
Also home to Newark, Camden, Detroit, etc. etc. etc. etc. I’m willing to bet that all the crappiest areas of the country are represented by a blue, even if just locally. And unlike you I do not lay the total blame for these areas being crappy on their blue leaders. Its simply a fact that people in need are likely to vote for people whom promise to give them stuff, which is how the Dems get elected ever since the New Deal. It is unfortunate, but those very giveaways then come back to bite those people in the rear end as someone has to bear the burden of taxes and regulations and given enough burdens those able to will leave or just not be productive making the situation worse for those whom remain.
Mostly demand , not regulations is what drives real estate prices up as evidenced in the above cities.
Supply and demand is always at the base of prices. However both supply and demand are affected by outside influences. Regulations are one of those influences. And from the study, made by a very well regarded guy with a PhD in economics at that, it was found that regulations was a key factor that tightened supply enough to drive real estate prices skyward in the overpriced parts of the country. For example, NYC has plenty of land; especially if efficiently used. But builders have problems building up, thus being able to spread out the cost of the land and some of the building costs among more people due to having to get air rights, millionaire neighbors (or a plethora of neighborhood groups) suing due to loss of a view, tons and tons of paperwork, environmental study after environmental study. They can’t build up and sell the same piece of land to more people and they have a ton of costs while building. Walla, you’ve got tightened supply and high costs that drives up prices.
You spoke of high taxes , high unemployment, excessive government regulations on businesses etc as factors which drive companies , jobs and the young, well educated out. Bingo!! You just
described Ohio to a “T” - a Red state. This state has literally been run into the ground ever since Republicans took control over a decade ago. We are now the third highest taxed state in the nation , have a host of archaic and business unfriendly laws and regulations, and I won’t even begin to comment on the magnitude of other problems this state now faces. They are too numerous to list here.
That may be; I don’t know Ohio so I cannot speak. However even if true that just means the Reps there were governing like Dems; not uncommon in the north east and mid west. The political philosophies of each party affects the general outcome of each parties’ run of a particular government. However this will never be exact, only a generality, as each politician is an individual in a different area and will govern according to his own beliefs and the desires of his populace.
On the flip side, Red states typically attract and retain the uneducated, socially backward , bigoted,
I guess your from a Red state then. Sounds like your describing yourself. You forgot arrogant, pompous, and self-righteous.
conservative,
Yeah a belief in old fashioned values, morality, a work ethic, belief in free enterprise, love of country and one’s own culture and history. Yeah, that will depress real estate prices.
and economically depressed therefore, depressing the real estate market as well.
Hmm, if I were economically depressed (and planned to stay that way or at least though I could do nothing about being economically depressed) I’d find a state with the largest welfare state and move there. It just makes sense, being economically depressed, to either go somewhere were I will be helped to the maximal extend or somewhere where the economy was good enough that I could work my way out of economic depression; course it would logically be the former if I had no intention of working my way out of being economically depressed or if I thought I could do nothing about it. Seriously though, the poor don’t go to a poor area to hang out with the poor people. Generally they just happen to be from a certain area and remain there being unable to go somewhere else. Or, if they area able to go somewhere else they then go someplace they can afford, obviously someplace with low real estate prices; maybe a red state or more commonly someplace that is really, really cheap since its a really depressed or possible even dead area which can exists in both Red and Blue states.
Of course, there are exceptions to this as seen in the West as people move to places like Arizona and Nevada for the climate and jobs etc… but, as more of the young educated locate there, you will see a shift in the political climate as they become more blue.
Maybe. Then again maybe not, they didn’t leave for no reason. Also the young are actually, currently anyway, more Republican. Those generally leftist student protesters the media gives ogles of time to and perhaps memories of the rebel students from the 60s are clouding your view.
On the flip side, Red states typically attract and retain the uneducated, socially backward , bigoted, conservative, and economically depressed therefore, depressing the real estate market as well.
In other words, a perfect place to have rentals. (I don’t think we’re all bigoted)
Mike