I am looking for a buy and hold - either 3 bd or 2 bd SFR in Tampa. As I screen these properties by researching the rents on rentometer and padmapper, I find it is getting harder and harder to find a property close to the 2% rule. I am hoping someone can tell me what I am I missing. For example, if I find a 55K house, should I expect to put a significant amount of rehab? Or perhaps I should settle that if I purchase a house a house for 70k with little rehab then not expect 2%. I have been looking in different areas of Tampa and even looking in Brandon. Any advice would be greatly appreciated. I just need to understand if I need to adjust my screening process and expectations.
Thanks for the help.
awful tough to get the 2% rule in areas like Tampa where the average home price is considerably above $50,000
@Eric Odum Do you think the 1% rule is a better guide to use for evaluating buy and hold properties?
Your particular financing has a lot to do with it. I'm finding that 1% properties won't work if you assume the 50% rule on expenses and want to cash flow $100-$150/unit (after debt service). It's best to quickly run the numbers using your interest rate and terms rather then looking only at the rent ratio.
For example, with a 4.875% interest rate on a 30 year loan, I'm finding that I need at least a 1.2%-1.25% rent ratio for the numbers to start looking good. Once you know how your particular financing situation effects cash on cash return, and cash flow, then you'll know what rent ratio works for you.
That makes sense. I have evaluated some potential properties using the rental spreadsheet. I need to look at them again. Thanks for the response.
They are just rules of thumb, Lakeisha. I use 1% as a first screen. Every area is going to be different, though. i.e. Property tax rates are considerably lower in Sarasota Co than Hillsborough. You have to run the numbers....
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