Cash Flow/ Tenant questions

2 Replies

Looking for some advice from fellow BP er's. I bought my first rental looking to see what cash flow should be on a single family home. Put down (25 percent) on 89k for the investment property. Id prefer to have someone in my rental that I know from the town but would have to sacrifice on cash flow( maybe 100-125 mo), living in a blue collar town its tough to get top dollar rents. Is it worth renting to someone you personally know vs vetting someone you dont know? I know there is tons of variables just looking to see some peoples thoughts. If i could rent it tomorrow for $775 to a local vs $900 and have to wait and find a tenant. Whats everyones thoughts?

Thanks,

Derek

Hey Derek! Personally, getting somebody local is always nice, but it starts to bring emotion into the numbers. Sacrificing cash flow, especially $100-125/ month is a very large amount, especially since it is a SFH. It is possible to find good renters outside of the location of your rental. Will it take longer to find them? Possibly, but it may also be shorter. You don't know unless you start advertising it. If you could rent it to someone in town for $775, see if they would go up to your $900 amount if you can add an amenity that makes them believe it is worth the added cost. Hopefully that helps. Happy investing!

@Derek McGillicuddy It's always a pretty big gamble if you rent out to someone you know. Sometimes people like to take advantage of a relationship and try to leverage that and make excuses, and it's always hard to have to tack on late fees or even go through an eviction!

You need to approach your investments as a business, and run it as such. $100-125 per month adds up to a lot over the course of a year or more. I'd say advertise it and try to get it leased up at the higher amount (you can always go DOWN in price, but never UP in this situation!), and if it doesn't get enough interest after a week or so, drop the price a bit.

Good luck, sir!