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Prashanth Suresh
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invest 300k for a monthly rent of 2500$

Prashanth Suresh
Posted Jan 21 2023, 09:18

I am looking to invest about 300k for a rental property in Texas/North Carolina with a steady rental income of 2500$ per month. Please let me know if this is a realistic number to chase. If so, please let me know areas, property managers who can help me with the same.

thank you.

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Benjamin Aaker
  • Rental Property Investor
  • Brandon, SD
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Benjamin Aaker
  • Rental Property Investor
  • Brandon, SD
Replied Jan 21 2023, 12:54

We should just be clear first that 300k is the purchase price and you are not putting 300k down on a more expensive property. If it is the former, you are at break even or even possibly in the red. Have you heard of the 1% rule? That is what some say is the minimum monthly rent as a percentage of the total purchase price. For you, 2,500/300,000 is 0.8%. It's very difficult to get single family homes right now that cash flow as rentals. They are all overvalued from a rental perspective, unless they need a lot of work. I recommend to avoid this one.

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Jonathan R McLaughlin
  • Rental Property Investor
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Jonathan R McLaughlin
  • Rental Property Investor
  • Boston, Massachusetts (MA)
Replied Jan 21 2023, 14:42

Not enough info to be helpful…good neighborhood? House has lots of expensive capex to come or brand new? Is the current rent low or market? Any changes coming that make something worth less or more? What’s your financing? Could be more than OK could be lousy….

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Jonathan R McLaughlin
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Jonathan R McLaughlin
  • Rental Property Investor
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Replied Jan 21 2023, 14:46

Oops, if you are putting all cash down it won’t be a very strong return after expenses, maaaaybe 5%. Better than a CD or treasury bond but much more risk.  If you plan to finance out half of it or something that could make sense, or if the all cash offer gets you a discount off of market

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Jon Kelly
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Jon Kelly
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Replied Jan 21 2023, 14:49

@Prashanth Suresh do you know how quickly you can find out this information? Maybe 2 minutes??? 

Use Zillow or other MLS sites and look for recently sold homes and houses for rent.

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Crystal Smith
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Crystal Smith
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ModeratorReplied Jan 21 2023, 16:38
Quote from @Prashanth Suresh:

I am looking to invest about 300k for a rental property in Texas/North Carolina with a steady rental income of 2500$ per month. Please let me know if this is a realistic number to chase. If so, please let me know areas, property managers who can help me with the same.

thank you.


$2500 per month net cash flow over 12 months is $30K per year.  (Net being after all expenses) If you invest $300K cash for that return then that means your looking for opportunities with a 10% capitalization (CAP) rate.  To your question is that a "realistic number" That kind of CAP rate is possible but it usually only happens when investing in a higher-risk property in a location where the income may not be as "steady" as you want.  At least that's my experience.


   

Real Estate Agent Illinois (#475. 112189)

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Eliott Elias#3 All Forums Contributor
  • Investor
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Eliott Elias#3 All Forums Contributor
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Replied Jan 21 2023, 21:38

You're not going to find that, unless you're running a STR or some kind of rent by the room situation.

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Prashanth Suresh
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Prashanth Suresh
Replied Jan 22 2023, 16:13

Thank you @Benjamin Aaker  @Jonathan R McLaughlin  @Jon Kelly @Crystal Smith @Eliott Elias for your comments. 

I believe i was not clear when i mentioned 300k investment... it translates to 25% downpayment - 75k down. I am planning to go in with another friend to get this figure.

if i pick an example home  (https://www.redfin.com/NC/Rale...) that i can looking at. - principal interest $1,359+ hoa $101+ Homeowners' Insurance (116)
+ property management (8% of $2500 (potential rent) = 200$)  == $1776

If i get 2500 rent, for instance ... will have saving of $724  per month after expenses of  $1776 (11.5% cash on cash return.)

I believe i am not considering other factors like property managements charging 25-50% of the first months rent anytime they find a new tenant , any maintenance issues for the property and vacancy time.

I am not sure which areas can i expect a rent of $2500 in Texas / NC/ Arizona/Florida assuming i will be able to find an investment rental home for $300k.

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Tim Bee#3 General Real Estate Investing Contributor
  • California
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Tim Bee#3 General Real Estate Investing Contributor
  • California
Replied Jan 22 2023, 21:07

Bottom line, it doesn't even meet the 1% rule. Skip it.  You don't even have to throw out any more numbers or data about the deal.  It's NOT a good one. There are plenty of 1% deals out there.  Even today!  

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Jonathan R McLaughlin
  • Rental Property Investor
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Jonathan R McLaughlin
  • Rental Property Investor
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Replied Jan 23 2023, 03:20

And you haven’t included any maintenance or vacancy reserves. And your 2500 rent is hypothetical yes? I don’t look at the 1% rule as a holy commandment, especially for quality properties and Raleigh is booming so you could do ok with this as stated if you self managed and got good tenants. That’s a pretty cheap lower middle renovation though so is this a lower end neighborhood?Septic and wells are cheap till they need something. 

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Chris London
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Chris London
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Replied Jan 23 2023, 18:14

I realize 3703 Hester Cir was just a generic example and not the point of your post but here is some detail on that property to put things in a different perspective. 

That is East of the 440 and on the border of Knightdale. This is not a bad thing, East Raleigh and Knightdale are great but you would be looking at $1600-$1800 for that property providing renting in season (April-Aug) and allowing for pets.

If you look at the sales history of this property the buyer/flipper bought it in March '22 for $300K and tried to sell it for $350K and now is back at $300K minus what he paid to flip it.

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Drew Sygit#3 Managing Your Property Contributor
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Drew Sygit#3 Managing Your Property Contributor
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Replied Jan 24 2023, 10:28

Check out some of the books here on BP for more info on how to estimate your rental returns.

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Pat Lulewicz
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Pat Lulewicz
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Replied Jan 24 2023, 10:33

It will be extremely challenging (1/1000 houses on the MLS) to find a $300k house in NC that can rent for $2,500 as a standard Long Term Rental. These rents are generally large 3-bedroom or most likely 4-bedroom homes in the $450k range. As a Medium Term Rental or Short Term Rental, then yes, definitely doable.

Add financing to the equation at 6.5%+ int rates and this will be break even or losing money.

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Rich Tenor
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Rich Tenor
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Replied Jan 24 2023, 10:44

Would you suggest investing in a deal outside of Texas and North Carolina that provided you the same return. 

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January Johnson
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January Johnson
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Replied Jan 24 2023, 13:41
Quote from @Prashanth Suresh:

Thank you @Benjamin Aaker  @Jonathan R McLaughlin  @Jon Kelly @Crystal Smith @Eliott Elias for your comments. 

I believe i was not clear when i mentioned 300k investment... it translates to 25% downpayment - 75k down. I am planning to go in with another friend to get this figure.

if i pick an example home  (https://www.redfin.com/NC/Rale...) that i can looking at. - principal interest $1,359+ hoa $101+ Homeowners' Insurance (116)
+ property management (8% of $2500 (potential rent) = 200$)  == $1776

If i get 2500 rent, for instance ... will have saving of $724  per month after expenses of  $1776 (11.5% cash on cash return.)

I believe i am not considering other factors like property managements charging 25-50% of the first months rent anytime they find a new tenant , any maintenance issues for the property and vacancy time.

I am not sure which areas can i expect a rent of $2500 in Texas / NC/ Arizona/Florida assuming i will be able to find an investment rental home for $300k.

I can get you STRable properties in the $300K range all day long in Panama City and/or Panama City Beach that will do an average of $2,500/mo in gross rents. You can mid-term rent them if you don't want to STR.

And if you want to do a DSCR loan, talk to @Tyler Solomon about how you can maximize your profits.