I am glad that you replied. I was going to “page” you in a thread, but I can just pick your brain here, if that’s OK.
First, I agree with your assessment. It’s actually what I’m thinking about doing: buying rental properties on the cheap with all cash, watching them cash flow, and then (and only if my “uncle” wants his capital back) selling them off in five years.
Do you prefer SFHs or multi-family? If multi-family, are you interested in 2-4 units (maybe as many as 6-8), or larger properties with 20+ or even 100+ units?
Also, I have long wondered what kinds of properties you buy that (1) you collect 2% of the value of the property in rent each month and (2) you expect to spend upwards of 50% of the rent each month in operating expenses.
I live in the Atlanta suburbs, and I just don’t see properties that generate this kind of rent relative to their value. A $50,000 property that generates $1,000 per month in rent? I just don’t see these.
Also, if you are collecting 2% per month in rent, and half of that is going to operating expenses, then that means that operating expenses can be up to 1% of the property’s value each month.
I know that insurance, taxes, repairs, etc., add up fast, but are they really going to be $500 per month, or $6,000 per year, on a $50,000 property?
Are these properties generally in need of tons of ongoing maintenance? I am just trying to get a feel for what they “look” like.
I buy into the idea that, the cheaper a property, the greater the percentage of your rent that you might have to put into expenses, but I’m having a hard time with the “2% of cost for rent” and “50% of rent for expenses” model.
Maybe I just need a better understanding of your market.
I appreciate your tremendous contribution to the forum.