I currently "own" (mortgage) a home in New Albany, IN. The house is the smallest house on a historic and sought after street in New Albany. My wife and I are planning on moving within the next three months. I would like to keep and rent out the property. Being my first real estate investment I am unsure how much we could charge for rent, appropriate terms included in a leasing contract and any updates needed before a potential renter would move in. My wife is also not sold on the idea.
Brandon Turner suggests 12% ROI but I am confused on how to calculate since I am currently living in the house. He also suggests cash flow should be at least $200 per month. I currently pay $750 per month for my mortgage including taxes and insurance . My research, Craigslist and Zillow, suggests cash flow of $200 per month ($950) is at the top end of the market. Though I could not find any comparable rental properties on my street. The only other suggestion I found was Zillow's Zestimate of $1200 per month, which seems high.
A little more information on my house. It was sold as 2 bed, 1.5 bath. However, one bedroom was in the basement which has walkout door and one bathroom is a toilet next to the wash and dryer (no privacy).
Any and all tips will be greatly appreciated.
I used to own properties in Terre Haute and Huntington, and know people that own lots of places around Indianapolis. Rents were about $500-700/mo for places outside Indianapolis, and slightly higher near Indy. Getting $1200/mo for a 2br sounds insane to me, but it could be doable if the market really is that high.
ROI to calculate rent isn't how it works, it depends on what the market rent for the area is. You said you looked at craigslist I would also try other websites to get a feel for what rents are vs how nice your place is.
You could always engage a broker to rent the place for you and try it out for a year.
I grew up in NA.
Consider the following...
You pay 750$ now... but if you rent it out your insurance is going to go up.... also this won’t be your primary residence anymore so you will lose your homestead exception, so your property taxes are going to increase.
Call your agent find out what changing the policy to a rental will be... let’s say this comes out to a total payment of 800$ with new policy.
Now say you rent for $1000
-10% vacancy $100
-10% maintenance and repairs 100$
-800$ mortgage, taxes, insurance....
This property isn’t making you any cash flow.. Best case you are building a little equity... more Likely you will lose money.
You would need to rent for 1250$+..... and in NA... with a wonky bathroom setup...very doubtful.
My 2 cents.. GL.
I live in Floyds Knobs and own rental properties. The rates for a two bedroom house in New Albany runs about $650 a month.