Minimum monthly profit

11 Replies

What is the minimum monthly profit you look for in a rental property?
I am looking for $400 a month on a duplex, is that reasonable?
What other ways can you benifit from a rental property?

I look for a minimum of $300 mo. but I pay a property manager and am pretty tough on keeping back plenty of cash for repairs and vacancy loss. I think all things considered $400 is a good goal to shoot for. If you really want to maximize your rental properties.. try rent-to-own on some of them. You can get a larger downpayment, more rent, sell at maximum value, and some times the people don't follow through...hence the reason they have bad credit and need a rent to own...and then you do it again.

Originally posted by "mblaff":
I look for a minimum of $300 mo. but I pay a property manager and am pretty tough on keeping back plenty of cash for repairs and vacancy loss. I think all things considered $400 is a good goal to shoot for. If you really want to maximize your rental properties.. try rent-to-own on some of them. You can get a larger downpayment, more rent, sell at maximum value, and some times the people don't follow through...hence the reason they have bad credit and need a rent to own...and then you do it again.

can you give me a "rent to own" scenario, say the house was 120,000 with a monthly mortgage of $900. What would that play like?

Set up a lease/option with the tenant. Let's say you set up an option for the tenant to buy the house in 2yrs at $135,000. They can give you 5k down. You make the lease payments based on that $130,000 on a fixed rate mortgage at 10% for 30 yrs. Now the tenant is paying you more than $900 mo. for rent and is responsible for caring for the house like it is their own. You take their rent and pay your mortgage down. They maintain the property. And at the end of two years you have collected the interest on the first two years of a $130,000 mortgage. They still owe $128,000 and they either refi and buy the house, move out, or make another lease/option with you.

Mike

Some other ways to make money on your rental properties:

-coin laundry in the basement or each unit

-offer Internet service for a fee; while water, cable, phone, electric are all regulated and you cannot sell at a profit to your tenants, Internet service is still unregulated.

-Get a real estate license and provide all of your exiting tenants as referrals to another agent when they move out

-Arrange referral agreements with a moving company, or a box delivery service, for when tenants move out/in.

-Accept rent payments by electronic check; reduces your administrative cleanup and reduces delinquent rents, saving you time and money.

Really, the possibilities are nearly endless. Anywhere you can add value is an opportunity to extract additional revenues or to reduce cost.

-J

When you are looking at profit, do you mean pre-tax, or after-tax positive cash flow.

A house I am looking at now is negative cash flow before taxes, but positive cash flow after taxes. My goal isn't necessarily building cash right now, but is growing wealth in the long term.

-Accept rent payments by electronic check; reduces your administrative cleanup and reduces delinquent rents, saving you time and money.

How would this work ? Does your tenant have to be set up with a bank ? Thanks.

Steve

Originally posted by "FatherDemon":
When you are looking at profit, do you mean pre-tax, or after-tax positive cash flow.

A house I am looking at now is negative cash flow before taxes, but positive cash flow after taxes. My goal isn't necessarily building cash right now, but is growing wealth in the long term.

The question was for your indivdual goals. I want to do whatever allows me to obtain another property faster. Whether it be by giving me more monthly income or by getting forced equity ot take out as a down payment.

FatherDemon -- I think it depends on what your individual goals are and whether you're trying to be a full time investor or not. Overall, real estate appreciation nationwide (historically over the long haul) has been between 6%-8%. Stock market, overall, has averaged 8%-10%. Warren Buffet would say you want an investment portfolio that's a mix of cash, stocks, real estate, and bonds.

SteveGent -- There are a number of services out there that will help you get set up to collect rent payments online via check, VISA, MC, AMEX... They all involve the same basic procedure. Landlord provides tenant with an authorization form (usually provided by your paymnt processor). Once signed, Landlord enters/faxes information to payment processor and in 5-10 days they start automatic debit withdrawals. Landlord pays monthly and (sometimes) setup fees to payment processor. Similar process for credit cards.

In the interest of fair play, here are a couple of companies that offer online rent collection services, one of which is mine, but you should pick the one that best fits your goals:
ClearNow -- just electronic checks, but simple and easy to set up
RentingYourHome.com -- electronic checks, AMEX, VISA, MC, PayPal, has more features
Payment Services Network (PSN) -- excellent product, but complex for a small landlord to set up; must be underwritten during process
PayRent -- electronic check, AMEX, VISA, MC, Paypal

It's better for you the landlord to accept credit cards b/c you never deal with default (VISA chases bounced checks, not you), and they fund faster than checks. Also better for the tenants b/c they can manage money better and collect frequent flier points or other benefits. Downside is that it's more expensive.

J