The worst time to buy a rental property?

7 Replies

I've been researching about BRRR and rental properties in general, and looks like in my area (Acworth, GA) single family homes that are being listed in the price range I can afford (175-220k) have a rental price of around 1300-1500 when you shop around for similar homes online, so when I run my numbers on them, including repairs, vacancy, capEx, taxes, and all that stuff, it turns out they would be cash flowing 150$ in the best cases, and the rental market doesn't seems to allow higher rents, so, what am I missing out? Why there are all these $225+ homes being rented for around 0.6% of their value? How are those landlords even covering costs? I'm a 23 year old looking to invest into real estate but all this got me really confused

@Jorge Pirela, you're not missing a thing.  High cost areas do not lend themselves to lots of ca$hflow on day 1.

However, they usually do lend themselves to being high growth areas where you can increase the rents.  This, in turn, increases the cashflow.

Rent increase percentages ALWAYS lag purchase prices.  If they didn't ppl would be buying vs renting.  ;-)  Once home prices appreciate, THEN rental prices begin to increase.   

I'm in AZ where I can increase rents 5% per year easily.  It takes a low cashflow property to medium in 3-5 years.  From the sounds of it, your area may be a similar situation.  

In the 'west', where I am from, these can even be speculation plays where the properties will negative cashflow.  But there is (hopefully) a big payday in years to come.

Hope that helps.

@Jorge Pirela you are right on with your analysis. So you will have to work a little harder. One way is to search out properties that are distressed and rundown that sometimes is a tip off to a tired LL as well-once refurbished you can bring rents to market following leases and local laws. If it is listed get after it! If you found properties like that by combing your area go to the county website, get the name of the owner and contact them.

If you want to invest locally draw a circle around your house indicating how far you are willing to drive, it will contain lots of pockets where you might still be able to cashflow even if it is a little off the beaten path. All the best!

Promotion
BAM Capital
Multifamily Syndicator
Targeted 10% Monthly Returns | Passive Income
Backed by institutional-grade apartments, strong sponsor track record, $700M AUM, over 5,000 units
Learn More

As others said, each market is different: house prices, vacancies, rent, taxes.  Look around a bit in neighbouring areas though a cash flow of $150 a month, isn't bad.  the price of houses in an area and rental prices aren't always correlated.

Wow I didn’t expect such a great feedback! Thanks guys! As somebody who doesn’t personally know anybody who invests in real estate, i appreciate y’all taking the time to reply and help me understand all this a little better, good luck to you!

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you