Help me understand something? (1% rule, 2% rule, etc)
Hi everyone,
Firstly, I know these are guidelines only. I got that....
But regarding the ROI of a property I'm considering, I don't see the benefit to buying a rental that leaves me in a negative cash flow each month. What am I missing here? Why are people buying these properties? Moreover, why are the sellers even listing them if it's so high that they know nobody could break even as a landlord on that property? I must be missing something, as I said.
For example, I have an opportunity to buy a duplex at 135,000 which rents for 650 per side, taxes of 1,500 annually, plus other expenses we all know will factor in as well. The rent won't even cover the note on the property so the cash for taxes would come out of my pocket, not to mention all other fees and costs such as repairs. Yet, they sell these duplexes like this regularly so I figure there is something I'm not "getting"
To me this duplex would have to be priced under 70,000 to make numbers work on this deal. I can't let myself consider a property unless I'm gonna clear 200+ in cashflow monthly.
What do you think? Are these buyers just incompetent, or buying hoping for huge appreciation, or using it for passive loss on other income?
Thoughts? Thanks in advance :)