What should I look for in a Rental Property?
Homer Glen, IL · Member since 2014 · 9 posts · 3 votes
Hey everyone!
So I'm going to be meeting with a real estate agent to help me find some deals.. Since I need to give her some criteria for what I am looking for here is my list:
I was wondering if you guys think I forgot something.. So my question is, what is it I should add to that list that you think is important?
Adam
Welcome @Adam Yunker,
Its great to hear that you are investing in your future! Is your agent an investor herself? Has she worked with investors before?
Questions for you:
Best of luck Adam!
Welcome @Adam Yunker,
Its great to hear that you are investing in your future! Is your agent an investor herself? Has she worked with investors before?
Questions for you:
Best of luck Adam!
Adam Yunker also consider the minimum cash flow you're willing to accept. Just because you pay $70,000 doesn't automatically mean it'll cash flow.
Yeah, sorry I forgot to mention that.. I'll be putting 20% ($14,000 + $1,500 for closing cost) and will be running the numbers looking for my magic Cash-Flow number of $300/month ($3,600/year) which will get me just over a 20% ROI. Since it's my first property I just want to go the conventional route and make it cash-flow. Then when I get experienced and done a couple deals I'll try some creative financing down the road, but for now I'm just sticking to the basics :)
The biggest thing I would do is look at your different markets with in an hr from your home. You will be surprised how much they can vary. Pau attention to taxes, this will be the biggest expense you will incur. Be conservative on the amount you plan to rent it for. I agree typically the value is in the bones of the house or in another words the ones with a little TLC needed. The homes that are all a fixed are often over priced due to all the renovations. They are shooting for top dollar. If ur patient you can often find one in between.
@Adam Yunker I hope your not looking for property that cheap in Will County IL. If you are your looking at buying at auction. You also didnt state what kind of property so Im assuming single family! In Will County IL for that price range your going to have to look in Joliet, IL. Based on average prices for houses in that range you'd be looking at houses with about 1100 -1300 sq/ft annual taxes $2400.00 a year Insurance on property 900.00 a year so based on your numbers and the amount you want to put down you could never get a $300.00 a month positive cash flow. We'll just use your 70K mark TI will be $275.00 per month Mortgage $267.00 + 300 positive cash flow Thats almost $850 a month in rent! Drawback for you is that anyone able to pay that much in rent for a house wont limit themselves to that small amount of footage. The other thing that most first timers forget about is maintenance on the property. So from the property you have to figure out what would be the largest extreme cost you could encounter. For homes with city water, its the underground pipes and basements. Out of city its Wells, plumbing, basements and septic tanks! Those costs can put you back $2500 to as much as $6000.00 So you see cash flow wont be there for you until you meet at least the $2500.00 or 9 months of rent!. Really before you go out and try any deal do yourself a favor and learn about all the costs associated with being a landlord! Once you get it right you shouldnt have any problem repeating the process. Where you buy a property has as much to do with rents as anything. Neighborhoods, school ratings, police reports ect are all factors when investing in rental property!
@Adam Yunker I hope your not looking for property that cheap in Will County IL. If you are your looking at buying at auction. You also didnt state what kind of property so Im assuming single family! In Will County IL for that price range your going to have to look in Joliet, IL. Based on average prices for houses in that range you'd be looking at houses with about 1100 -1300 sq/ft annual taxes $2400.00 a year Insurance on property 900.00 a year so based on your numbers and the amount you want to put down you could never get a $300.00 a month positive cash flow. We'll just use your 70K mark TI will be $275.00 per month Mortgage $267.00 + 300 positive cash flow Thats almost $850 a month in rent! Drawback for you is that anyone able to pay that much in rent for a house wont limit themselves to that small amount of footage. The other thing that most first timers forget about is maintenance on the property. So from the property you have to figure out what would be the largest extreme cost you could encounter. For homes with city water, its the underground pipes and basements. Out of city its Wells, plumbing, basements and septic tanks! Those costs can put you back $2500 to as much as $6000.00 So you see cash flow wont be there for you until you meet at least the $2500.00 or 9 months of rent!. Really before you go out and try any deal do yourself a favor and learn about all the costs associated with being a landlord! Once you get it right you shouldnt have any problem repeating the process. Where you buy a property has as much to do with rents as anything. Neighborhoods, school ratings, police reports ect are all factors when investing in rental property!
Your rental rates are way wrong and you can definitely buy good, clean real estate out here for $70,000. Not exactly where I live because it's a little more upper class, but I was thinking Orland Park, more towards the west. Orland Park is in Cook County right next to Will county and I would never invest in Joliet because that is pretty much bad territory all around. Orland is constantly growing and commercial buildings being built, road expansions, etc with everyone moving out there for work. As for maintenance and vacancies and capital expenditures I already have conservative numbers being taken out of the expenses monthly to cover the cost later on while having money set aside when I buy the house of 4 months of expenses (including the mortgage). The property management firm I talked to (http://www.chipropertymanagement.com) have a 30 day guarantee to find a tenant otherwise they cover the rent. And I also am not looking to get into a deal if those major expenses like a roof, or piping, or what have you is about to go bad and I'll have an inspector to let tell me that. Since it's my first investment I'm taking a very conservative route.
East Joliet is the most challenging. The closer to downtown, the greater the challenge.
West Joliet (west of I-55 - Joliet extends well into Grundy County these days) is mostly newer development. The bargains are mostly foreclosures. You strike gold when you find a pre-foreclosure, probate, etc. that's not on the market yet.
Do your driving-for-dollars, then check anything you find in the public records to look for potential deals.
Great to see a local investor on here! I don't really know the far west part of Joliet to well, I'm more familiar with the centralize Joliet like Crest Hill, Fairmont, etc. On the other hand I am way more familiar with Orland, I used to work down there and had friends that live down there and pretty much everything entertainment wise I did was in Orland Park. I'll be definitely expand my reach into Grundy County and primarily be looking for deals in those two areas!
Thanks!
Adam-Welcome to investing and the BP Community! I don't think you're going to find anything less than $175k and up in Orland that is turnkey.
Have you looked in Lockport as well?
You'll be able to get a good sense of what rents are from looking on zillow or craigslist. I'd then take a look at that property and search to see what it would sell for. It will be a great way to quickly learn a market.
Good luck!
Chris
I wasn't really looking for a "turn-key" property, is that bad? I mean the management company I use will cover rent up if they can't get a tenant in (that's there guarantee) I just saw this property: https://www.investability.com/7011-S-Carpenter-St/... would this be worth pursuing? Obviously I haven't done any "in depth" research, but just curious if it was worth a call. The only thing I notice is it was built in 1898 and that could mean some big expenses under the house are waiting for me, so don't get me wrong, I would definitely get an inspector out there to check things out.