Real Estate Investor · Montreal, Canada · Member since 2008 · 34 posts · 1 vote
Hey all,
Im from Montreal, Canada so your local market might or might not reflect the reality i see here, but ive been noticing a trend while searching for rental property: it looks like the further away u get from a large city (up to a certain distance) the more positive cash flowing opportunities there are! I just came across this 4 plex for 209 000$ with 22 800$ in gross yearly rents, it also said seller was motivated so im sure it could be talked down to 185 000 or so, thats over 12% annual return! Ive seen quite a few around those numbers, and as a newbie investor im happy i now know its not that hard to find, just gotta look on a regular basis! Anyway my lil problem here is that most of those properties are about an hour drive in any direction from where i live (i have this duplex in a very central location that i live in and rent the upstairs, not anywhere near beeing cash flow positive if i didnt have as much equity in it). Anyone has experience with having rentals an hour away from your place? What are the potential ups and downs? Im not sure if its a good idea but the cash flow is very tempting... Any input?
Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
19y
Annual return? This property will lose about $280 per month. That's the kind of return I don't need. Properties that have gross rents of about 1% of the acquisition cost will not cash flow when you consider the real world expenses.
Real Estate Investor · Montreal, Canada · Member since 2008 · 34 posts · 1 vote
19y
Well MikeOh youre gonna have to detail those expenses to me, cuz i really dont see where u can find a building thats gonna cost 185000$ and bring in 3700 a month (44400$ a year!) I know different people use different ways to determine if a building's gonna be profitable, and i also know that nobody buys a building that yields this good, at least not in my area! MikeOh i dont mean to offend you but if you can break down thoses expense for me id appreciate!
Real Estate Investor · OH · Member since 2008 · 4k+ posts · 1k+ votes
19y
pimpin80,
Yes, the successful investors do. I buy them like that all the time.
Operating expenses include taxes, insurance, management, maintenance, vacancy expenses, advertising, utilities paid by the owner (at least during vacancies, rehab, etc), evictions, court costs, entity maintenance, legal fees, common area upkeep, lawn care, snow removal, office supplies, damage done by the tenants (in excess of the deposit), lawsuits, capital expenses (although not technically an operating expense), etc, etc, etc. (I could go on and on).
Dallas, TX · Member since 2008 · 73 posts · 0 votes
19y
If the purchase price of the place was 185,000 and the rent was 3700, I think there would be positive cashflow. Lets say the mortgage was 1500/mo ($1411.86 to be exact according to the calculator). Expenses should be 50% if im correct. So, to breakeven, the rent should be 3000, but if your getting 3700, you should have 700 positive cash flow right?
Real Estate Investor · London · Member since 2008 · 3k+ posts · 74 votes
19y
Mike and you can debate how to do the math.
Look at the distance in terms of what you will have to do. If you are the hands on property manager then the hour will seem pretty long some days. If you have a vacancy and someone calls to view the place can you really count on them showing up at the time scheduled? I find that many times prospects seem to think not showing up at the agreed time is fine as you have nothing better to do with your time.
You are in a cold and snowy area when winter strikes. How will you feel if you get a call late in the night, during a storm or when you have other commitments?
Now, if you are passively investing and someone else is managing then an hour away is much less of a concern. Some recommend being hands-on while others are fine with investing at a distance. The topic tends to a bit heated some of the time.