Louisville, KY · Member since 2014 · 78 posts · 2 votes
I am just curious if anyone else thinks these numbers are good. It's a 2/1 SFR 648 SQFT, .4 acre lot that backs up to elementary school. Interior & Exterior are fine. Siding. Taxes are $243 per year.
Rental Property Investor · Henderson, NV · Member since 2013 · 96 posts · 33 votes
12y
It could be good, but I'd project out the expenses more precisely. The 50% "rule" is a rule of thumb.
On a smaller house, you may find expenses are more than 50% because certain costs do not scale down below a minimum (water heaters, HVAC, service calls, appliances, etc.)
Salem, OR · Member since 2013 · 701 posts · 159 votes
12y
First, the 50% rule is a basic estimate. Before buying you need to estimate each element that makes up the expenses. 2nd, I find it more difficult to stay within 50% on lower rent houses. It seems much easier if the rent is $1,000 per month.
The last point is that I seldom find a property that doesn't need some rehab before I rent it.
It could be good, but I'd project out the expenses more precisely. The 50% "rule" is a rule of thumb.
On a smaller house, you may find expenses are more than 50% because certain costs do not scale down below a minimum (water heaters, HVAC, service calls, appliances, etc.)
Of course, I have not dove into my due diligence yet, this is just preliminary numbers. I think that so far the numbers warrant further pursuit. I will schedule a complete walk through and break down any cost I foresee.
Even if I increase my expense ratio to 60% and increase my rent ready repair work to $2,000. I would still be sitting at a .77% ROI per month.
Rental Property Investor · Henderson, NV · Member since 2013 · 96 posts · 33 votes
12y
One more suggestion I have is to balance percentage return with absolute dollar return. A high percentage return sounds good, but if the denominator is small, make sure it's worth your time and effort.
I'd rather have a 7% return on a 100k property than a 10% return on a 25k property.