Like a lot of newbies, I suppose, I'm struggling with choosing my strategy. Ideally, my model would be 3bed, 2 bath SFRs that could rent for $1K a month or more and that I could purchase/fix-up for $75K or so. But I have trouble finding those near me (I'd prefer to build a portfolio within an hour). I'm in southern VA, about 50 mins south of Roanoke and 75 mins north of Greensboro and Winston Salem.
20 mins from me is a blue-collar town with lots of homes available for under $40K. But rents in that market would be closer to $500. Still, you could easily beat the 1% rule, but, then again, how much cash flow can you really make if the house only rents for $500?
I guess I'm wondering if anyone does well focusing on areas where rents are only in the $500 range, or if I'm better off going elsewhere to get rents $1K and up.
The triad has the recipe you are looking for. However, the 3/2 will need serious renovation if you want to be in an area that will demand quality tenants that can afford gross rents in that area. Have you considered condos in the friendly area? You will attract higher end tenants and be in the price point you desire.
Thanks @Randy Janoe . Actually, I had been excluding condos from my searches...not sure why, but I have been. Is that what you invest in?
I invest in whatever makes sense. Even outside of real estate (automobiles). Keep in mind HOA fee has to be accounted for, but for big cap ex items you would have to budget for anyway (such as a roof). You can pull retail condo listings off the MLS and generally meet the 1% rule. I also have a contact for property management, should you go that route.
Personally - I find a lot of success in the $700-900 range. If you follow the standard financial advisor rule of "rent being 25-30% of your income", this equates to an annualized salary of $33,600 - 36,000 for that potential family/tenant. This is a pretty reasonable salary expectation for any individual OR make renting even easier for a family. Not to mention, in the event of market downturns, you can get your previous high earners who looked for B+/A- rentals, to come down to a lower price range of rentals, but still have enough space and a backyard for their family.
@Pat Lulewicz , that's the kind of model that feels right to me. So if you're buying SFRs for that model, I assume you're looking to spend no more than $70K or so all in...is that right? Or what do you look for?
Thanks for the sound advice.
It'll all depends on what your expectations are. I don't focus too much about the 1% rule or the 2% rule. I aim for anything that's around the 11% or 12%+ expected ROI with adequate CapEx and Maintenance reserves. So naturally you have to consider HOA and property tax variables as well. In addition, the "knowing the geographical market" discussion comes into play of where the rent falls within that $700-900 range, and where the rent could get within the next 2-3 years if you're making this a long-term play.
As with all things in life, "it depends".
I do believe guilford country is doing a good job of attracting companies paying at or above median income. One, it creates a demand for housing.Two, people can afford the housing.