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.
Rental Property Investor · Olympia, WA · Member since 2014 · 781 posts · 744 votes
10y
@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.
North Lauderdale, FL · Member since 2015 · 25 posts · 1 vote
10y
Wes, yeah, I probable stretched those numbers. More conservate would put it closer to $130k and bought for $95k. I don't know if it needs rehab or what rehab will cost.
My area of investment is not where I live, I will be going up to work on the house I am rehabbing next week, so will get a look at the inside of this house. For that price, I am sure it needs work!
I spoke to a friend, he said pricier homes are harder to rent, but the cheaper homes in this area are not that much cheaper than this house.
Of course, I am reminded that I bought my first house for $37.5, and the second for $35k and they are or will be worth about what this one cost
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
10y
I like owing rentals in the more expensive neighborhoods, but I do NOT buy larger homes there. For example , I had a 2 Br/2 Ba, 1200 SF single family in a class A neighborhood a block away from a really good elementary school, and it was great! On rare turn overs, if I could get a small, young, upper middle class family in there with a child starting 1st grade ... well, that's a family who will likely stay there for the next 6 years (1st-6th grade) and in fact they would, and pay rent like clockwork, and take great care of the house because it was a home to raise their child in. Often the primary bread winner had a larger W2 income than I did, and I was more than fine with that. From 2009 to 2016 the rent went from $1800 to $3200 and values took a similar trajectory because it was in a neighborhood where people wanted to live and mine was an entry level home there. So, smallest house on the nicest block has been a wining strategy for me.
Investor · Plano, TX · Member since 2013 · 63 posts · 11 votes
10y
Other things to keep in mind with large rentals is wealthy people go through divorces too. Many times that can result in one or both parties to end up renting. I know a few cases of multi-year tenancies at higher end properties due to divorce.
Rental Property Investor · Chilliwack, B.C. · Member since 2015 · 115 posts · 37 votes
10y
I had a higher end house priced at 500 - ish that was a few miles away from schools, the applicants I had were working professionals that did not have kids - these people I found were bad with there money, they made six figure incomes but couldn't afford to come up with the downpayment for there own home, drove expensive cars and lived well outside of there means.
Now I will buy a higher priced rental, 600 k closer to schools (within walking distance) and I have applicants nocking down my door to get approved.
I find its not the price of the home (within reason) but how close it is to the amenities that people are after.
Someones posts was saying they were buying in retirement communities, if this is what people can afford and don't want to buy for health reasons, fixed income, etc, etc. This may and sounds like to me to be a great market.
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.
I was talking rentals, but flipping would also fit into that mind set as well. If your yearly net rental income makes a solid ROI that your happy with the rate of return for COC that you invested, by all means buy it. Case in point, I just bought a rental and had to put in 9k in at closing, it's netting me 6k a year. That's a 66% return on COC per year. So no brainer, as long as your making that return!
Wholesaler · Pompano Beach, FL · Member since 2016 · 10 posts · 1 vote
10y
Single family homes inherently aren't as good for rental properties as mulitfamily rentals. If you are in the rental business you are better off using the same vendors, some locations, same office, same everything for the sake of efficiency. Single family homes will have nicer fixtures, appliances, carpeting etc. Mulifamily are designed to make money. You usually won't find a chandelier in an apartment dwelling. Also, you are just way better off as a landlord if you deal with economies of scale.
Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes
10y
Julie,
I would fully understand your goals and where that property is located. I've invested in low 200s in Austin and high 300s. Cash on cash returns are higher w/the low 200s, however, if I'm looking at total return, my high 300s are in such a great area where building new homes is hard (environmental restrictions) and key high tech companies are building nearby, some of the top schools in the state that I believe demand there will drive greater appreciation potential w/the more modest CoC return will make this still a solid investment (think total return). That said, I do expect more turnover because most of these residents are in some type of transition and they can afford to buy a home over time. I try to do leases longer than one year, say 18 months if I can get it so that my leases are expiring in the summer months where easier to rent IMO and reduces that turnover a bit.
I do think more families and low 200s homes when I bought them will stay longer cause they are in solid school districts and more affordable rents. More stability leads to less makeover costs, lost rents for vacancy gaps, etc. The residents in these homes can't afford the down payment or are dealing w/some historical issue that may have hurt their credit but have good incomes. I do have one resident who's on an ex-pat assignment and has a budget from the company so this price range works for many. FYI - these are two year leases and the company pays me directly 5 days before rent due, for the readers, these are great if you can get them.
Developer · Point Pleasant Beach, NJ · Member since 2015 · 303 posts · 216 votes
10y
@Julie Rogers it really depends on what you are looking for. The more expensive homes provide a lot more capital appreciation in good markets than the less expensive homes, however, usually not great on the cash flow side. With that said, there are great deals to be found in any market. I own a good amount of homes that bring in 4k to 6k per month in rent and they turnover very quickly. A lot of people nowaways just want to be renters and not have to worry about home ownership, even at the upper income levels.
My advice is to look at each property on a deal by deal basis and do what works best for that individual property so you can maximize your return on investment.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
10y
@Curtis Bidwell brings up a great point which is that many people choose to rent higher value homes. I have heard the case made that in many markets you are financially better off renting houses in the higher end range. Anything under $200K you are probably better buying.
Look at the example Curtis gave of Christopher Meloni. I read an article that said the house he was renting went for sale for $8 million dollars. That would be a $37K monthly payment financed 30 years. He is basically saving $17K per month which is $200K per year. Lets assume he can invest in a market and buy $100K homes that net $1000 per month after expenses. He could buy two houses per year with cash, so within 10 years he could have $20K per month passive income. He will own $2M in property that is netting him $20K per month. The $8M property he lives in is netting $20K per month.
Although it is true there is a rental market at all price values, the return is better on the lower end. It is more difficult to find renters at the high end @Julie Rogers, but more importantly your return will not be as good.
Property Manager · Denver, CO · Member since 2016 · 8 posts · 1 vote
10y
Would you ever consider short-term vacation vs. a long-term rental? Is the home located in a part of Florida that permits Short-term vacation rentals? And if so, is it an area that might draw vacationers looking on sites like VRBO or HomeAway?
Real Estate Agent · Central, FL · Member since 2016 · 85 posts · 9 votes
10y
If you need an accurate rental projection, let me know. I'm in Central Florida and can get you recent lease rates now pending, as zillow etc can be a little off. Glad to help-
My two cents... I personally think the larger the home the larger the family you attract. In my market a 4-2 would certainly attract more small/medium sized families than would a smaller 2-1 house. I personally try and target families as they are more financially secure, don't want to move once they get their kids enrolled in the local schools, and typically want a place longer than 6 months to a year.
Investor · Coppell, TX · Member since 2008 · 2k+ posts · 646 votes
10y
Hello and welcome to BP! Your selected market will tell you what is the most popular or what is popular right now. That will tell you what you ought to do there. Not necessarily the most popular but what has been working. That is where a good and experienced Agent will give you advice on what you should do or what is working. Since the inventory is low and it has become a seller's market, cash buyers are getting top priority because they can close quicker. While things are like they are, do the things like Team building and getting leads. Marketing is probably the most important thing in real estate. If your phone is not ringing you probably need to make a marketing change.
Always do the analysis numbers to see what you should offer and try to look at the subject property or have a clause in the sales contract that will allow you the time (usually 15 days) to make an inspection and possibly back out of the deal without a penalty that exceeds your earnest money amount, if any. Also have "or Assigns" after your buyer name in the contract so you can transfer to your company name or wholesale the deal. Right after you close a deal, get an insurance policy that will protect you if there is a loss. As soon as possible after you close, change the exterior door locks on the sibject property. I if those locks are still in good shape just use them at a future address.
I am 59 years old and I found BP about 11 months ago and I am still deciding what to do while I am medically recovering. I also went to college, not that it is mandatory, and I got a business degree that emphasized real estate. Since I was in Texas and planned on staying there I found out if I was qualified to take a broker test so I took it and got a license. I kept that broker license for about 30 years in 1980 when I got it. Regardless of what I had i felt more comfortable with the construction business. I have been in the construction business since I was 17 including those college years. Most of that time I have been either self employed or run other people's business. If you think that I can help you please contact me through BP at any time. Good luck to you!
Real Estate Investor · Rancho Santa Fe , CA · Member since 2016 · 323 posts · 107 votes
10y
I don't like expensive rentals your return might be smaller, but there is people who rent them they usually are pretty good tenants, but focus on the average home price in your area rentals, and buy homes that are worth 80% of that.
my area is San Diego,
Example Average home price is $483,000 I like to buy $320k-400k Properties, there is a larger demographic of population in does neighborhoods, usually younger families don't have quit yet what it takes to buy a home. and you get more ROI.
Investor · San Diego, CA · Member since 2016 · 19 posts · 4 votes
10y
A larger home in an A or B neighborhood will most likely get lower cap rates, but on the flip side, you will probably attract stable tenants and have lower turnover. Plus, that house will probably have better potential appreciation than a house in a C or D area.
Rental Property Investor · Plant City, FL · Member since 2015 · 1k+ posts · 379 votes
10y
Julie Rogers you've got a lot of great advice. I have rentals in North Lakeland and rents are $1,150-$1,275 a month. I love this price range. Yes it can be a tiny bit more time to find a qualified tenant, but I feel they are a more qualified tenant and stay longer. I'm willing to sell the home to the tenants on lease option. John Schaub invest in much higher price points in Sarasota and does very well. The key is that the rent you look to collect needs to be supported by the area.
Real Estate Agent · Cedar Creek, TX · Member since 2010 · 161 posts · 63 votes
10y
No one can predict the future but with the doubts you have and your inexperience I wouldn't buy the property. Look for a deal you're more comfortable with, investing is risky enough without having to wrestle your doubts every day.
I like owing rentals in the more expensive neighborhoods, but I do NOT buy larger homes there. For example , I had a 2 Br/2 Ba, 1200 SF single family in a class A neighborhood a block away from a really good elementary school, and it was great! On rare turn overs, if I could get a small, young, upper middle class family in there with a child starting 1st grade ... well, that's a family who will likely stay there for the next 6 years (1st-6th grade) and in fact they would, and pay rent like clockwork, and take great care of the house because it was a home to raise their child in. Often the primary bread winner had a larger W2 income than I did, and I was more than fine with that. From 2009 to 2016 the rent went from $1800 to $3200 and values took a similar trajectory because it was in a neighborhood where people wanted to live and mine was an entry level home there. So, smallest house on the nicest block has been a wining strategy for me.
David I like hearing those points you brought up, it is definitely an advantage to have the stability of a nicer neighborhood with functioning schools nearby. I am currently closing on on buying a 2 Br/2 Ba, 1000 SF condo in a good location in SoCal. From a cash flow perspective, I have a question. I would purchase the property to house hack the first year, in order to qualify it as a primary residence. After the 1st year, I would be renting both bedrooms out and aim to purchase another property. Would you be reluctant to take a hit the first year, cash flow wise, in the SoCal market if it meant gaining a primary residence for more rental deals later on?