Since I found BP yesterday I've been posting questions all over as I am a 1st time homebuyer (owner occupied duplex) as of last week. Everyone has been soooo helpful so far and I promise to pay it forward once I've got a little experience under my belt! Thank you, thank you, thank you!!!
Anyways, I'm starting to second guess myself about retaining the tenant that the previous owner had in one side of the duplex. Lease is signed but just trying to get a feel for the future... She and I both knew she was getting an incredible deal, but she loves her place so I knew she would agree to a rent increase. But now I'm starting to wonder if I couldn't have gotten more if I'd have shopped it...
Its a 1/1 with a garage, screened back porch, and fenced in backyard, all appliances, renting for $825. If you go on craigslist there are ZERO comps available within 5 miles, which made it harder for me to put my finger on a good dollar amount. My realtor that helped me close on the place said the fenced yard and garage are coveted by pet owners (tenant has a small dog) who may not have many other options.
Anyone on here know the northern Palm Beach, FL area market? Could I have gotten more out of the unit??? Thank you all again for your great insight!!!
O man, I'm on the low end, but at least I have a long-term person who takes care of the property! Brianna, you've been a huge help so far, I even gave you a shout out on the "Who's helped you?" thread, but my computer won't let me tag for some reason. Thank you so much!!!
No problem @Justin C. !
Your realtor should be able to get some rent numbers outside of the 5 mile area to at least give you a gauge to go by as well. Rentometer is usually good at getting a good reading as well. Just make sure the median and average are somewhat close, otherwise a high or low rent may be skewing things a bit. Hope that helps..
How much did you pay for it?
I ask because of my 1% rule. I generally don't take more than 20 seconds to look at a property's monthly rent is less than 1/100th of the price I think I can pay for it.
This is a deviation of the 2% rule which is discussed all over BP.
The other factor to consider is how much you are now paying to live. If your contribution every month is significantly less than the $825, you are doing well. I'd love to lay out the math with you, so drop some numbers in here and I'll tell you what I think you should be paying for your place :)
What do you pay for:
Sewer and Water
Heat/Utilities (for your situation, which common utilities do you pay. outdoor light, etc)
Cap Ex and Ops (this is a savings account for the eventuality of replacing the roof, water heaters and such)
Mgmt Fee - as a % (general consensus here on BP is 10%. include it even if you think you are going to self manage)
Vacancy- as a %. (8% represents 1 vacant month/unit/year)
If you lost your solid long term tenant you would probably have to put in new carpet and other repairs which costs $$. Then if you were vacant for a month while repairing and getting a new tenant in you lose $$. The new tenant could turn into a problem and you have another vacancy next year. I'm not sure how much more you are thinking you could get but if you charged another $50/month it would take you 16.5 months just to make up the one month vacancy, who knows how many more for the needed repairs. I'd say stick with a good thing. If you think it's way low then raise it a little each year.
Thanks for your thoughts guys. Aaron, I paid $189K, in a pretty high-end market. Place sold in 2006 for $265K. My payments are around $1500/month for PITI. Tenant is responsible for all utilities on their side. No HOA.
Since we are moving into the other side, which we are renovating first, I was thinking I would take post renovation pics and post some ads on craigslist just to get a feel for the demand and what rent the property could demand. Any thoughts on this idea???
My integrity would not allow me to post a residential ad for a place that I had no intention of renting out. Wait until you are ready to rent before advertising. When you do advertise, be ready to take calls from prospective tenants and field their questions fairly.
As to your current tenant, don't upset the apple cart for a few more bucks. @Brant Richardson is right on with his advice.
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