Bought two houses and rented them out.Good,okay or bad??

13 Replies

Long time reader, first time poster. I just bought two houses and fixed them and rented them out.. I would really appreciate anyone to chime I'm to see if I good deal or not and if my rents are good enough. I paid cash for both deals.

First house 

Purchase Price - 27,990

Rehab cost - 8,000

Rent - 850

Second House

Purchase Price - 29,600

Rehab - 2,500

Rent - 775

Thanks for all input. This is in Philadelphia Area

The numbers by themselves look good, but this says nothing of the neighborhood, the quality of the tenants, the items on the property that still need to get fixed sometime in the future, etc.

Noone can predict quality of tenants though, just screen and do the best you can correct?

@J Cobb what are the monthly expenses(insurance, prop taxes, HOA dues etc...)

agree with @Dawn Anastasi - we need more info

I thought the  2% was the only way to determine good ROR . I'm above 2% correct?? The taxes are  about 850 a year for each house. Insurance is 80 bucks a month for each.. Why would Insurance and taxes factor in if the rent is 2% of purchase price..Everyone has to pay Insurance And taxes. I understand taxes can effect the rental if taxes is high..Trying to Learn dont want to sound pushy LOL.

I can do better than that all day long in baltimore. Many years of trial and error have made that possible, however.

Your timing for asking this question, post-buy, is curious.

J Cobb I think it's a good deal if for the area, the rent is a fair price and you understand who your tenants are and what it's going to take to manage them and the property.
I think it's a bad deal if you are renting this for $850 not knowing what your getting into.
Bottom line, I think you would be the best to tell us. If the fair market rent in this area is $850 then your spot on. Hopefully you purchased, rehabbed, and occupied in a timely manner to minimize cost as well as securing a qualified tenant for this area.
Remember, it's all about the net. Doesn't matter what you rent it for if you can't manage it or don't collect rent.
So my question to you, based on what you know of the area and other rentals, are you in the ball park?

Originally posted by @J Cobb:

I thought the  2% was the only way to determine good ROR . I'm above 2% correct?? The taxes are  about 850 a year for each house. Insurance is 80 bucks a month for each.. Why would Insurance and taxes factor in if the rent is 2% of purchase price..Everyone has to pay Insurance And taxes. I understand taxes can effect the rental if taxes is high..Trying to Learn dont want to sound pushy LOL.

 The 2% calculation definitely isn't the end-all-be-all of determining good returns. It's a great quick and dirty way to get a basic idea of how well something will work out but other expenses/calculations definitely have to be taken into consideration to get a better picture.

The numbers you give definitely look good like and since they meet the 2% rule there is a high chance that you will do well but its still possible to be a bad deal without all the numbers.

Lets take House 1 for example:

$35990 Rent Ready, Rented for $850 = 2.36%
50% rule = $425 to Tax, Ins, Maint, etc and $425 in your pocket which is great

Now lets say House 1 was in a trailer park or Co-op with lot rent or dues of $250 a month?

$35990 Rent Ready, Rented for $850 = 2.36%
50% rule = $425 to Tax, Ins, Maint, etc - $250 lot/dues and $175 in your pocket which still isn't bad.

Both examples meet the basic 2% rule but you can see how quickly the end results change when you factor in other things.

@Jason C.  

 The rents in Philly do vary greatly depending on the area. I am assuming these are 3/1 houses. If you don't mind me asking, what area of the city are they in?

Jason Cobb unless there is unique like @Chris K. mentioned the numbers look great. If the area or tenants are horrible you can expect high maintenance and repair costs. I would love to see those numbers on my rentals.

@Jason C. just curious how long did it take you to fill the units once you started advertising?

Originally posted by @Rhonda Jones:

@Jason Cobb 

 The rents in Philly do vary greatly depending on the area. I am assuming these are 3/1 houses. If you don't mind me asking, what area of the city are they in?

One is in Northeast Philadelphia like on the border of frankford and northeast philly. The other one is in Southwest Philadelphia Near about 7 blocks from Island Avenue.

Thanks Brandon, I am hoping they wont require high maintenance.

They didn't take long to fill. I put them on craigslist and people were beating down my phone so much i took the ad down. They gave me first ,last and security like it was nothing.  They have been filled for two months now. I will be buying two more in December. Trying to buy at least 3 a year.

@Jason C.  

Congrats on the purchases.  They look like solid investments.  I looked at few places in North Philly that I would have purchased if I'd been local.  Minor issues that would have added up contractor after contractor.

Your plan looks solid, I hope you renters are constant and paying on time!

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