Updated over 10 years ago on . Most recent reply
Pricing - market vs cash flow
We all know that commercial real estate often is valued and sells based on the rent it draws. How mush do you think that applies to single family houses? We've got a house in Memphis (rehabbed, no work needed) which is rented for $725 on a lease with 20 months to go before renewal, in a neighborhood where rents run $700 to $750. Management, property taxes and insurance run $216, for an annual cash flow of $6,108. If somebody is looking for a 10% return, that would mean they should be willing to pay $61,080 for the property. However, the prices in the neighborhood include foreclosures, so are all over the board. We are thinking $52,000 would be a good listing price. What do you think and why?