North Lauderdale, FL · Member since 2015 · 25 posts · 1 vote
Are larger, more expensive homes hard to rent.
I am concerned that anyone that would rent such a nice place could afford to purchase their own nice home, so finding a renter that would stay for a while, might be difficult.
@Julie Rogers There is a market at every income level for various reasons. I have a very nice 4 bd + office 2600sf that I rent for $2500/mo. There was so little on the market for that quality of home that I rented it the first weekend I advertised (in February!)
I have an article about the Law & Order actor Christopher Meloni who was paying $20k/month rent for his Beverly Hills rental!
It's not just those who can't afford to own who rent, but those who choose to rent for other reasons.
@Julie Rogers There is a market at every income level for various reasons. I have a very nice 4 bd + office 2600sf that I rent for $2500/mo. There was so little on the market for that quality of home that I rented it the first weekend I advertised (in February!)
I have an article about the Law & Order actor Christopher Meloni who was paying $20k/month rent for his Beverly Hills rental!
It's not just those who can't afford to own who rent, but those who choose to rent for other reasons.
Who are your typical renters in your market? How much are you asking for rent? If most of your renters are blue collar, they are not going to pay $3000 a month to rent your house. However, if you have traveling scholars/professors and or doctors, who might only be at your area for a year or two, then they might rent. If there is not a lot of those folk, then I wouldn't hold your breath.
My mom rented out her 3/2 split level home in Dublin, CA (SF Bay Area) to a family who wanted to be in that school district, but couldn't afford to buy there. They were there for years, and only moved because my mother terminated their agreement so she could move back into it. They begged and begged her to let them stay.
The house is a foreclosure, and a good deal. The area is mostly a retirement area in central florida.
I am worried that for a home this nice, most people would buy over renting, or might only rent it for a short period, till they find the home they want.
I can rent it at a lower price than a home like this would rent for.
@Julie Rogers Where in Central Florida is the home? I have a nice 1700sf home in Sebring. It only rents for $900/mo. I was told we would get $1250! Research your particular market carefully to know you can actually get what you expect. Check craigslist, Zillow rents, Pad mapper, rentometer, etc, along with local property managers.
I get solid, year-round tenants but not the rent rate I need for that home (I lose about $160/mo plus vacancies and repairs).
I have a 5/2, 3400 square foot home in a nice school district in Birmingham, Al. Unfortunately, tenants gave notice last month after their 1 year lease. I was concerned that we wont be able to find the next tenant quickly. Fortunately, I have a strong property manager there, and was able to secure the next tenant 2 days after the last vacated.
Rollan, thanks for the info. That is what I am worried about, tenants only renting for a year.
I really don't have any experience as a landlord. I only have one house rented and one I am rehabbing.
I have decided to finance a home, and am looking. I really like this house but am concerned that anyone renting such a nice house can afford to buy their own.
Curtis, thanks again for your time. Yeah, zillow says it should rent for $1,400.
Still, I have this mental block that someone with a good job, would buy their own house or only be in the area for a short period.
Though the property management company can find a new tenant as needed, that cost me the month the tenant left, and the month for finding a new tenant.
Yeah, thanks for the info on they said it would rent for $1,250 and you are only getting $900. I wonder sometimes about what the realtor says. A grain of salt.
I know a guy who is renting a nice big house for 2600 a month, because his credit is too bad to get a mortgage. He has been renting this same house since he lost his own home to foreclosure in 2009.
He refuses to downgrade to a smaller house, because he cares more about appearances than his bank account.
In my humbled opinion....There are way more blue collar families out there looking for rentals than there are families with higher incomes, and have good solid careers...I own three rental properties, two of them I paid in the $70k range and they rent for $850 a month...Never had any issue renting them out, actually had people kicking my door down to move in, therefore I could be real selective as to who I picked...
My third rental house is a $170k home, and I rent it for $1100 a month. Ive had more issues and headaches with that house than any other house and would love to just be rid of it...I will stick to the $70-$80k range homes, for me they are cash cows, way easier to pay down, and I have a larger audience to select from. Try paying down a 165k home, its way to exhausting. I am not going to even try...
My first step would be to look at the numbers. Sure it isn,t science, but a quick mental note of the 1% "rule" or 2 % "rule" might give you some guidance. In my area, the higher priced homes generally have a lower return. Think of the war zones. $35K units renting for $800, etc. Now think of more expensive communities. $400K houses renting for $3000 per month. My first question would not be if I can rent it. My first question would be what kind of return can I make on it. You will find, as others stated, the some people will rent regardless of ability to purchase. However, if the return is poor as compared to other investments, what would be your motivation? Appreciation? Pride of ownership? Tax benefits?
I like to be in the middle area. Median house prices are around $160,000 in my area so I like to be in that area for ARV. As you get higher in sale price the rent as a percentage of value declines. Back to the 1% rule that the monthly rent should be 1% of the value of the property, a $100,000 house should rent for $1,000 a month. But when you get to a $500,000 house here it doesn't rent for $5,000 a month. The market for $5,000 a month rent places here is very thin, there are not many people looking to pay that much rent a month. I've had some rentals that are 2% or even 3% rule, but I've never seen a $500,000 house in my area rent for $15,000 a month.
A friend of mine does rent short term, all inclusive condo rentals to movie stars and other famous people like professional athletes. He gets $5,000 a month for a 2 bedroom condo which includes all utilities, all furniture and maid service. If a movie is being made in the area then an actor or actress may rent for 2 months, but other times the place may be vacant.
Not everybody who has the income to buy a house can buy a house or wants to buy a house. I've rented to a doctor who had a bankruptcy and foreclosure and stayed for 7 years. I rented to a CPA, who didn't want the hassle or maintenance of a house also rented for 7 years. I've rented to other professionals who work a lot and didn't want to have the responsibility of a house or thought that they might leave the area and didn't want to be caught trying to sell a house when the economy was down, or days on market was long.
I have two single-family homes with four bedrooms and another one with five bedrooms. I typically rent them out for anywhere between $2100 per month up to $2400 per month. My turnover time has been about a month and fortunately my renters are mostly long term. I have no problems getting applicants however my properties in this range have hardwood floors, carpet , two and three car garages, high-end appliances, and granite countertops. Two of them are also in a subdivision with a very nice pool and tennis facility. I also have a cheaper two bedroom rental that I rent out for about $1000 a month that does not have any of the higher-level amenities. My point is if you are going to rent houses at this price range, they must be Nice and you must have reasons to expect to get this type of rental price. The key is screening. We denied close to 10 applicants for my last property. Many of them met income criteria so it's not a matter of how much money they make, you have to factor in all aspects. Proper screening is the key. If you don't have the funds to let one of these properties sit vacant for a month or two, it may be wise to stay away from them but if you can float an empty rental and handle the maintenance, it works out pretty well. Just as an FYI I, I have had a lot of air-conditioning cost on many of these properties this summer so have a good reserve as well. Hope that helps
Levi, good point. The ROI and COC numbers are good to very good and more importantly the price I could pay versus the CMA is great, but it all hinges on my actual ability to rent the property.
If I was flipping, this would be a great investment, but I am looking for rental properties.
Percy, I don't think renting the home will be a problem, but high turn over will eat the profit fast, especially since this will be my first home with a mortgage. Thanks for your time
There's a market at every price point, but in my experience, higher-end homes tend to have much lower margins. I just sold a 300k home which I used to buy a 250k duplex that brings in almost twice the rent. It's more work too, but not all that much more.
@Julie Rogers you're focused on renting it, but you have other outs here...namely, selling it again. If it's actually a 140k house you can get for 90k all in, and it doesn't perform as a rental the way you want, put it back on the market for 120k(still under market...) and take the 25k after-fees profit. Of course, this assumes you know the market well and it's actually 90k after you do any rehab needed.