I live in Columbus, Ohio and I am thinking of buying a house that I would live in for a couple years then rent out when I move out west. I have close family in Columbus so I will be traveling back to Columbus a few times a year to check on the house. So what I'm curious about is, does anyone buy houses of the MLS at market price to rent out? The areas I'm looking at are limited around columbus because my job is way in country and I don't want to add a crazy amount to my commute so the area I want to buy is nice and has great schools but its very uncommon to find forclosures or below market price houses. Would it be a bad idea just to find a normal at market priced house on the MLS to live in currently and then rent out? I'm estimating my mortgage would be about $1100-$1200 and I would be able to rent out a house in this market for $1400-$1600 depending on size etc. of the house I find. I've been trying to look forclosures or cheaper houses but they all seem to be in areas that I would not want to live in and would attract less than desirable tenants.
If you mean "asking price" when you say "market price", you probably can't make those numbers work. If you have a $1200 mortgage and rent the house for $1500 you are going to be losing money when you take vacancy, repairs, management and capital expenses into account.
Primary homes usually make mediocre or poor investments. You have to find the value available in the house, whether that's a great house at an insane low price, a beat up home you can rehab and add value to, something that is in between that could be reconfigured or added on, etc.
@Ida Powers have you considered looking at multi family properties. These typically have better returns and you can live right very cheaply while you still live in town with a tenant making a rental payment. Let me know if you'd like to discuss further.
A lot of people get into the business by renting out their old primary. If you can find a small 4 bedroom, those rent nicely. Don't get a huge yard because no one wants to invest too much time in someone elses property. Print off a 1040 schedule e and see how it will work out. Then lower the rent and see how that works out. Give yourself a 3 month vacancy and see how that works out. If your market is hot and you have to compete to buy, rest assured things revert to the mean. But the numbers could still work just fine over the long haul...you will have the advantage of an oo interest rate.
@Ida Powers , to answer this question "would it be a bad idea just to find a normal at market priced house on the MLS to live in currently and then rent out", I assert the answer is no, it would not be a bad idea. The concern would be that you will seek a home that is going to be great to live in, but will not be great as a rental due to the price point. It would be wise to analyze any property you want to buy as if it were going to be a rental immediately, that will help you land on the correct number that you should be buying a property at. Further, if you are willing to sacrifice some comfort, knowing that you are going to buy and hold the property when leaving the area, I would say that it is possible.
My first investment was a SFH that I lived in in Oakland CA, in the not so nicest part of town, that I was able to rent out after I moved out and into a duplex. The SFH tenant paid for the mortgage and left me room for cash flow, so, it is possible.
I like @Justin Taber 's idea of looking into multi-family properties, as the prices for one in Columbus are reasonable, and you may be able to get a double (or triple) in which tenant # 1 (and/or tenant # 2) would pay the whole mortgage note. I have been thoroughly researching properties in the Columbus / Dayton / Cincinnati areas for a few months, so I know this to be possible.
Thanks for all your responses. It has given me good insight and some things to think about! I still have a lot to learn but this site really helps out!
@Justin Taber I have looked into multifamily but those homes tend to be in areas I wouldn't feel comfortable living in and I would much rather deal with people that would live in nicer neighborhoods than the ones renting out duplexes.
I already have one house in NC that I bought as a primary home and now rent out. That one happened by accident but its been working out well. I have friends living there that take good care of the property and pretty much self manage the property. I'm not cash flowing much but building equity and the house has appreciated. I'm certainly not looking for a get rich quick. I'm 27 so I figure if I collect a few houses now, then 10, 20 years I could make some money off of them.
I have purchased two properties that were "listed" on Sibcy Cline's website but were not on the MLS...no joke. I just stumbled across them on the website. Both were at great prices - I have no idea how sibcy messed this up and failed to properly advertise it.
@Ida Powers As with all of the questions here, the answer is “maybe”. The price is the price regardless of source. You can find a good deal on the MLS and a bad deal through a wholesaler. There are plenty of overpriced off-market deals, pocket listings, listings on Craigslist, etc. One disadvantage that you have with an MLS listing is that it’s public. If it underpriced or a legitimately “great deal” then everyone can see it and you’ll be competing with cash-buyers, have potential bids above asking price, etc.