I have always wanted to be in real estate investing as it went hand in hand with being in construction for years and us owning a construction business. Few years back an opportunity fell into my lap and I was able to purchase two smaller single family properties from a family member 0 down and at 2% on the loan both houses and around 2.5 acres of land for 80K. I did not run the numbers at all and got excited and jumped at the opportunity. Now I am still learning everything and trying to figure out my numbers on both of these houses so I can continue to make money as needed since they are older houses and the repairs are starting to add up. I am fairly certain I priced my rent to low for my area. I have a couple questions to ask:
1: Would it be wise to sell the houses and got to multifamily such as duplex or triplex or keep these and use them as assets to be able to do the multifamily and add to the portfolio I already got.
---- I live in a college town so i feel that doing the multifamily route will give me a better return the majority of the time vs single family property.
2. How do you determine the rental value? Do you have real estate agents come and look the house over and tell you what they think its worth?
Look for rental comps in the area on apartments dot com, zillow, craigslist, etc. Same size bed/baths and approx sq ft and if yours is nicer, better amenities, garage, etc, then add/subtract accordingly. List it on the higher end of your comps then drop the price til you find the sweet spot. Do a serious background/credit/employer/criminal/employment check. Don't cut corners on this.
If you are making money on the sfh's then I say keep them. Be honest with yourself about major expenses coming due (roof, furnace, AC, HWT). If the rent covers your PITI and expenses then why not keep it.
There's an app called Dealcheck and if you're a BP paying member then you can use their rental property calculator. I recommend playing around with that a lot, reading a lot, and discussing this a lot with anyone who will listen. RE agents, landlords, investors, etc. Learn as much as you can. Know and understand the terms CoC ROI, Cap rate, GRM, IRR, NOI, etc and how to calculate them. Ask seller's agents for rent rolls and seller's disclosures then "run the numbers" as we say using dealcheck or similar rental property calculator. Bottom line learn as much as you can and you'll know when you're ready to jump in. Save for a 20-25% down payment in the meantime and learn about creative financing strategies.
Thank you Anthony for your feedback. I priced both houses to what I thought was a good price but looking over more recent comps it appears I was somewhat short, but I have been doing pretty much what you suggested with Zillow, Realtor.com, and a couple other sites. Both houses are rented right now so I'm considering raising it once its times for a new contract. Since I am still newer to investing game I am learning all the terms and doing some study time so thank you for referencing CoC ROI, Cap rate, GRM, IRR, NOI, etc and how to calculate, that gives me some more terms to review and figure out. I know ROI and cape rate since those are the most common that everyone uses and references but different people find different ways that work for them so working on getting my strategy down.
https://www.rentometer.com/ Best place I know of for rental comps. You probably get all the comps you need for free. They have a pro-plan that is also fairly reasonable but with just two rentals, the free plan will probably do.
So for #2 the site rent-o-meter.com should help ballpark. Otherwise call around and just ask how much (comparable to what you have).
@Daven W Blanchard - you said you’re in a college town. Can you rent to students by the bedroom and make more money? I took a single family house a block from campus that was renting to a family for $1650 and rented it for $2150 by pricing it at $550/bedroom (4). You can provide basic furniture for cheap.
Since you got these houses for $0 down, I think you should absolutely keep them.
Now, as for the repairs, those come with the territory for older properties, so you can do an extensive rehab on 1 of them since you have some experience in construction yourself so that your repairs and maintenance expenses are drastically reduced plus you increased the value of the property.
I was going to say what @Natalie Schanne said: since this is a college town, you should rent out the rooms and get more in rents. Now, the downsides are wear and tear (solution: parents to co-sign) and seasonality (solution: higher rents saved for those down times).