rent to value rate for a new construction in cordova area

Memphis, Tennessee
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rent to value rate for a new construction in cordova area

Alex Chen
Member since 2018 · 1 post · 0 votes

I'm a first time remote investor here.  As there are so many variables for an old house, I decided to look for a new construction. I believe a house similar to the zillow list here

https://www.zillow.com/homes/for_sale/2090922653_z...

$1500/month rental for a 192k new construction is about right? If so then the rental to value is 0.78%. It is low compared to rule of thumb 1%. But for a new construction the maintenance is much lower. Would you consider this a good or at least fair investment?

Thanks for your input.

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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
8y

I would like to know what lender is doing 4.5% for rental homes with only 20% down? You also might be able to get a management company to work a deal for say a flat monthly payment in this example say $100 flat fee per month. 

Regarding the 1% rule, much harder to achieve these days on anything say $95,000 or more. 

Newer homes should provide lower maintenance but there is never a guarantee. 

Good luck 

Curt Davis - KAIZEN Realty538 Reviews
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  • Tristan H.
    Rental Property Investor · Memphis, TN · Member since 2013 · 56 posts · 29 votes
    8y

    Alex,

    First off, sorry no one has replied sooner! I stay away from things that are less than 1% just because it makes it very  hard to cash flow. $1,500 rent - $120 vacancy (1 month/year) - $70 insurance (guess) - $280 taxes (assuming 1.75% city/county) - $150 maintenance ( guessing 10%) -  $150 management (10%) - $780 mortgage interest and principal (20% down and 4.5%) = -$50   NEGATIVE CASH FLOW!!!!!!. 

    Cordova is an area of Memphis that has not had much appreciation. The flip side is that Cordova has remained relatively stable and most of the housing stock is pretty new. Not trying to be overly negative, just my two cents.

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  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    8y

    I would like to know what lender is doing 4.5% for rental homes with only 20% down? You also might be able to get a management company to work a deal for say a flat monthly payment in this example say $100 flat fee per month. 

    Regarding the 1% rule, much harder to achieve these days on anything say $95,000 or more. 

    Newer homes should provide lower maintenance but there is never a guarantee. 

    Good luck 

    Curt Davis - KAIZEN Realty538 Reviews
    WebsiteView Page
    1Reply
  • Anna Smith
    Investor · Lakeland, TN · Member since 2016 · 41 posts · 14 votes
    8y
    We own a rental in Cordova. I personally don’t go below 1%. In 10 years, I doubt this area will appreciate much. You home will start needing new appliances and things will wear out. And yet, you’ll still be getting about the same amount in rent.
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