Is There Demand for $4,500+ LTR Rentals?

Question

An $800k house with 20% down, 7.5% interest + taxes($8000)+insurance($1800) will have about $5,200 monthly payment, $5,800 if 10% down payment. Is there demand for $4,500+ rentals in your market? What is the profile of people willing to rent for $4,500k+ in that same neighborhood?

Marian Huish · Answer

I agree with @Chris Seveney about the #WashingyonDC metro area where I live/invest.  DC is an excellent market for renters given the high turnover of people coming here or passing through for political/Government careers. The only drawback in DC is the very strong tenant laws but still worth consideration.  Another market I’m in is InclineVillage in Northern Nevada of #LakeTahoe which draws a very high end luxury, second or vacation home demographic.  In addition to LTR‘s short-term rentals are very popular here if you can afford to get in at a minimum 800 price tag.  You can easily draw &100+ In annual rental income Securing your vacation spot in paradise! Another draw for Nevada is that it’s tax-free so that you can eventually convert that rental to your personal residence and enjoy beautiful Lake Tahoe in your retirement years while avoiding residential-personal property tax- A big draw for Californians who are fleeing that high income tax state @Adah N.. Connect with me for details if you want to learn more!

Dan H. · Answer

I have a quad with market rent very near $4500 for each unit.  I consider the area B+.

The units rent fast because the vacancy rate is low.  At this price point, the quality of tenants is typically better than the units in C areas.  This can mean lower maintenance/cap ex costs and less tenant problems (less arguements, late/missed payments, etc).  The tenants often stay for many years.

On the down side, the rent to value ratio in these areas is typically worse than in C areas.

I find both areas can appreciate similarly.

You can succeed in either C markets or B+ markets.  Most of my units on in B- to C+ areas.  I have done quite well in my RE investing, but if I were starting over, I may have targeted B to B+ areas.

Good luck

Dustin Lauer · Answer

@Adah N.  I would just pull up Zillow and rent range 4-5 K and see if they’re getting leased out over a few weeks to know.  I use some software for work but maybe Zillow for free could tell you.

Adah N. · Answer

@Dustin Lauer

Thanks. That is how I’ve been researching in my area. The listing gets removed after a month or two. I guess it must be renting?

Chris Seveney · Answer

Depends on the market. I live outside of washington dc so there are plenty of $4500+ rentals in our market. It really depends on the market. Basically you will need $800-$1M homes and a lot of them.Median home price probabaly should be above $500k probably closer to $600k.

Ryan Xu · Answer

A typical $1.8 - 2.5M SFH home in Eastside Seattle will rent around 5K. And there are a lot of them out there.

But if you break it down to 5 $500k homes around Tacoma, each of them can rent out for more than $2.3k to 3K easily.

So what I was suggesting to my savvy clients is, to break them down into smaller projects that can cashflow better as investments, and rent for living. Not only life quality is better, but investment risk is also lower than renting out one cash-burning home.

Adah N. · Answer

@Ryan Xu

That is very low rent on the Seattle side. I guess owners bought a while ago at much lower price. I agree it makes a lot of sense to sell and buy somewhere else? Unless they simply want to hold on and let it keep appreciating? Especially if the rent is covering all the cost?

Bob S. · Answer

In my area they last a day, year leases,  Its all about the area,

Good luck

Is There Demand for $4,500+ LTR Rentals?

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