I’m looking at buying a single family home as investment (rental) property. My question is - How do I determine the amount of rent I need to break even.
My loan payment would be $295 monthly, taxes $361 annually, and insurance appx $300 annually. I would have to put an addtional $10,000 of my own money into the house to make it move in ready. Once the amount of rent is determined (to break even) I will check the Rental COMPs in this area.
Thanks
It doesn’t matter what you need to break even - if what you need is more than market rents, you will have a hard time filling vacancies.
I think people use a formula that PITI should be half of what your rent is to account for other operating expenses. Don’t quote me, though - search this site to find out for sure! So you would be looking around $700 a month. This does not take into account the 10K that you are sinking into the prop.
Also, make sure the insurance you are getting quoted for is for landlord, not owner - because they are different. And always double check the taxes.
If you wanted to recoup your 10K within a year, your rents would have to be over $1100 a month, and hope nothing else breaks down!
Thanks 4 the reply,
What I am looking for is a formular that will assist me in determining what is the best price I should negotiate on purchasing property.
Yes TOOT what LoriK said is correct. It doesn’t matter what you want for the rents, it will rent for the same amount that all the other houses just like it in the same neighborhood have rented for. A real estate agent should be able to give you rental comps. That is really your ceiling you won’t get any more than that.
When you make it “move in ready” make sure you make it perfect. Put in new appliances and new carpet etc. That drives your repair costs to nearly zero. New appliances don’t break, and if they do they are under warranty. If the tenant breaks them, the tenant pays for the repair (that is what the deposit is for).
thnx 2 u both.
I will get with an agent for these comps this morning(emailing for that now).
Where could I find this information if I was to look for it myself? I know I’ve seen a website on this before?
tia
Well,
Learned a bit today. Homes often look better from pics, paper, and outside view. Property, land, location, park, schools, $$$…everything looked so promising.
Today, we went inside…this is me—> :shocked
Newbies out there…if you see, hear of any property which you may consider at all. Pleassssssssseeeeeeeeeeeee, make sure it is what they say it is. How in the heck can a home be a home without closet space (unless you are in Europe maybe), heat, and/or A/C.
Folks, we seen a home :rolleyes today…4BR 2Baths 2 kitchens.
HELLLLLOOOOO!!! :bs
GUESS WHAT!!! I NOW know the reason the NEW listing price is now 1/2 of the original price.
THANKS FOR ALL THE HELP, here in these forums. I knew to inquire on prior builder’s permits…a lot of renovation was done on this property. Guess what? :director There were none noted, file, or etc.
Hey, Property Manager. I tried, and guess what. I feel soooo good about the entire process. What a learning experience. Did this make me more frightened with REI? NO. Only wizer, and more like a shark.
There is a piece of REI out there for me, I know it.
Wish me luck. Whewww, this is no joke. Time for :sleep
Oh, did I say Thanks for all the advice?