Can't find a place - Not sure how to proceed.

5 Replies

I’m struggling a bit to find my first buy and hold property. I live just outside Nashville in a large and growing college town. I have $50k to invest into a rental property. My plan was to take $20-30k and buy one property now and see what I learn and then acquire another property at the start of next year.

Here’s the problem I’m having….There is a boom happening right now in the county. Homes under $175k are selling quick and many times well above asking. I’m hesitant to “jump in” just because I don’t know if this is a short term lack of demand problem, or something more long term. We just bought and sold a home in the county back in the fall and it was nothing like this. My area never really went thru a major downturn when the housing bubble popped. We just didn’t have much appreciation.

I had thought about buying a duplex, but there aren’t many for sale in our area, and the ones that are on the market are very old. Currently there is one built in 1960 for sale for $120k and renting for $675 per side which is reasonable for the area. My concern with a duplex is being limited to selling to investors and the appreciation not being has high when I do sell.

My realtor suggested I look at something newer since this is my first rental. He said that way I don’t have repair problems and I’d get a higher rent that would weed out some potential tenets. I kind of like this idea because then if I buy and decide being a landlord isn’t for me, I could easily sell in a year or two.

So here’s my questions:

  • 1.Given the crazy boom that’s currently happening, should I sit for a bit to see if things cool some?
  • 2.There are a couple newly built houses for sale for about $148k. I think I charge rent of 1% of purchase price (which is pretty common here). Plus I should see pretty good appreciate when I go to sell. Concern is that I haven’t read a lot where people buy new homes to rent out. Doesn’t seem quite as common.
  • 3.Any other suggestions or opinions? Am I thinking about this stuff correctly? 
Originally posted by @Brandon C. :

My realtor suggested I look at something newer since this is my first rental. He said that way I don’t have repair problems and I’d get a higher rent that would weed out some potential tenets. I kind of like this idea because then if I buy and decide being a landlord isn’t for me, I could easily sell in a year or two.

So here’s my questions:

  • 1.Given the crazy boom that’s currently happening, should I sit for a bit to see if things cool some?
  • 2.There are a couple newly built houses for sale for about $148k. I think I charge rent of 1% of purchase price (which is pretty common here). Plus I should see pretty good appreciate when I go to sell. Concern is that I haven’t read a lot where people buy new homes to rent out. Doesn’t seem quite as common.
  • 3.Any other suggestions or opinions? Am I thinking about this stuff correctly? 

Welcome to BiggerPockets, Brandon. 

First, let's talk about your agent. Is your agent an investor-friendly agent? How much experience does he/she have? Newer properties don't necessarily mean less repair problems or higher rent. A quality build from 60 years ago is better than a shoddy build from a few years back. Rent is determined by many factors including the state of the property. Ever hear location location location?

Trying to time the market is difficult at best. Who knows if there is a bubble going on in your market, or if housing has just started to pick up and won't stop. The Federal Reserve is talking about raising rates. That should cool things off a little, but they have been talking about raising rates for years. There isn't a hard and fast date they are going to raise rates, either.

You say you think you charge 1% of purchase price for rent, which is pretty common here. Do you mean common in your area or on BP? Theory only works on paper. You can only charge the going rate for rent, otherwise you will have an empty rental. If you purchased for $148K, would you be able to rent it out for $1480/month? If that is what other properties are going for, sure. My local market is about .5% right now, so not great at all.

Appreciation cannot be predicted either, so you really can't count on significant appreciation. It might happen, and it might not.

Mindy Jensen, Real Estate Agent in CO (#FA100049656)

buying new homes to rent is a good option IF it can be profitable in your area. Keep in mind after several years your expenses are going to jump because things will start failing at the same time since they all were new at the same time. If you decide to sell in 5 years it may not be a concern. Newer homes tend to attract a better quality tenant. Just remember to Screen Screen Screen. I would advise you to find investors in your area and ask what they are doing right now. In my experience they will be more than happy to tell you about your local market. 

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My area is similar to yours with MLS property. Selling quickly at prices that don't pencil out. I had to go for off-market deals, pre-MLS or folks that just don't want to go the standard route. Getting a realtor, putting 20% down and looking at open houses may work for a primary residence, but investors have to get more creative and savvy to find deals that work most times.

Try something simple.  If someone is having a large garage sale on craigslist, e-mail them. See if they have any interest in selling.  They say 40% of garage salers will sell soon.   I go a little further and look up the address on the assessor's site to see if they are renters.  I mail all absentee owner's a postcard.  Try and catch them at turnover.  You can do the same with folks that have places for rent.  There are more ideas than that out there, this is  just a couple you could implement with low pain and no money @Brandon C.

@Chad Kamerad gave a key piece of advice. Screen screen screen. The more work you do upfront, the less you have to do after they move in. Get good quality tenants who take care of your place, and pay rent on time by screening out the ones that don't make your cut. Better to have an empty unit for one month, than several months of unpaid rent because you are evicting.

Mindy Jensen, Real Estate Agent in CO (#FA100049656)

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