What Rent might I fetch for this house? And, help with possible deal?

16 Replies

I was wondering if any local investor that knows the brownstown/Woodhaven area  could help me determine what kind of rent i might be able to fetch for this one...

This is a newer construction home, built in 2004, in Brownstown.  Zillow says worth 252, but it foreclosed, and the homes in the area like it are generally selling for 200-220.

2300 sqft colonial, built in 2004. Single Family. It is in a HOA, but I looked up the bylaws and under lease restrictions it just says that no grantee shall lease and/or sublet less than the whole of any dwelling on the lot. So, it seems to me, that the HOA does allow investment properties as long as the entire lot is rented to 1 family.

If anyone has a rental in an HOA, do you require the tenant to pay those fees (usually 1 time fee a year here) or do you divide it out monthly into the rent and not mention the HOA fee?

In the woodhaven/brownstown area, homes that are about half that square foot are generally going for 1200-1300 or so per month, although on Zillow I'm seeing some ranches of 1400 sqft asking for 14-1500.  Is 2000 or 2200 a month unreasonable for a newer home like that?  It's a very nice, quiet area, new subdivision (2002), I can't find any like it that are rented or looking to be rented. 

Seems to me, just as a homeowner, to pay 2000 a month for rent, in any house.  But, I'm a small fish.

I'd like help with analyziing a possible deal if the rent can be fetched at that amount.  I'll post those later if I can get past the rent amount hurdle to start.  But initially, it looks like I could generate 5-600 a month in cash flow.  Is it normal to get higher cash flow on more expensive homes like that?

EDIT:  The home has a 3 car attached garage.  A selling feature no doubt.

Updated over 3 years ago

264k, not 274

Forget Zillow, their estimates are terrible.  Use redfin.com or realtor.com and search for real-time rental comps in your area. 

The renter does not care how much you paid for the property, they are only willing to pay what the going market rate is.  My experience has been rent drops off quickly once you get much above a certain threshold for your particular area. 

Where I live you may get competitive rent for up to $1500/month and then the rents really do not go much up from there, regardless of how nice or large the house is.  Generally speaking if you cannot get a 1% rent-to-value ratio ($200k house should be able to get $2000/month rent) for your house look for something else.  

If you cannot get your 1%, look for a cheaper house, maybe in the $140k range that can bring in $1400/month.  If you cannot find anything that is 1% in your area, consider searching in a different area/state.

As for HOA fees, taxes, etc., the owner absorbs those as a cost of owing the house so price your property accordingly.

I know zillow estimates are just estimates.  I just used it to look at the recently sold homes around it.  I know the renter doesn't care, but I have no idea what kind of rent I could get for that size home, and that new of one.  The homes I saw for 14-1500 asking on zillow are built around 1970.  I do agree that there is probably quite the leveling out of rent at some point.

No interest in going out of state, I'd like to find rentals around me locally, within 5-10 minutes drive at most.  Having trouble around here.  Not a lot up right now. 

I definitely don't want to do the deal and then get caught because I thought I could rent it for a lot more than I actually could.   

I appreciate the help.

We'll probably need the address or at least nearby cross-streets, how manjy beds and baths, lot size, etc. to give you a feel for what rents might be possible.

John D., Palm Vacation Rentals | [email protected] | 4155195039

3 bed, 2.5 bath, 2260 sq ft, lot size 10, 019sqft

Has a basement.  3 car attached garage.  Built 2004.  Sub division is 2002 oldest home.

HOA. Sub Division builder is still building homes...

Sold for 264k in 2004.

There is a 2130 sqft home next city over but within 10 miles of this one, asking rent is 1800..built 1997.   4 bed and 2.5 bathrooms.

Honestly I would bet that the house would not rent for more than $1600 or so. I know in my area once you reach a number it doesn't matter how big or nice there is a rental ceiling. Also the bigger, nicers houses are MUCH harder to rent. Once you reach that point its the price not size.

Here's an example of Summerville, SC

I have a 3 bedroom 2bath town house that is 1800 sqft no garage and rents nicely for $1250 sticker price $125k

I have a 4 bedroom 2.5 2300 sqft with 2 car garage in the same neighborhood that I am buying. I anticipate renting it for $1500.  sticker price $200k

If I was paying sticker I would buy the townhouse every time! 

There is likely a very limited market for renters seeking to spend 2k a month in the brownstown area. I have rentals in Wyandotte and lincoln park and rents run about half that. I think the rent is fair relative to the size and age of the home, but I would be very concern with long vacancies especially with 1400-1500 a month in expenses. Why not find a property somewhere else for 40-60k and buy the thing outright?. Your returns will probably be similar and your monthly expenses will be way less. I imagine you will need to spend 40k to finance the Brownstown home. Good luck.

Elizabeth do you expect good cash flow with only 1500?

Matt your suggestion is a good one,  I would just be worried about getting into a lower income area.  Riverview has some lower priced homes. I was hoping to find a woodhaven or brownstown home I could rent for 1400 but going to pay upwards of 130 or 140k. Cash flow not horrid but not great either.  But schools are good,  area is still up and coming.   I'll I grew up in Wyandotte! 

@David Roberts  I do expect to do well with the $1500 a month rent house for "very" specific reason.

  • Cost $150k- While the house is worth 200k if all goes well I will close on it for 150k, as it is a depressed short sale. 
  • 10k Renovation Cost- Since it needs work I will be able to renovate it to be a low maintenance rental. It will cost a little more to install tile hardwood floors and other low cost installs.
  • Increasing Rent-  I expect the rent to increase as this area takes off. So I wouldn't be surprised in two years if rents are more along the $1600-$1700 price. My $1500 is very "conservative". The area was hit REALLY hard in the recession. It was a planned community who's big business are only now coming in. In the past 2 years it has seen a lot of recovery. I own two town houses that I have people beating on my doors. 
  • Class A property- I have found that higher level houses have much lower margins but also much lower expenses. Therefore while I will only have a $220 "difference" in the beginning I expect this to not be a problem.
  • Trial Period- I have not bought this level of house yet. So this will be a trial to see if there are people willing to rent this level of a home.
  • Low Downpayment- I found a broker who lets me put 15% down for my Charleston Investments. So the amount leveraged is high, allowing me to have more accessible cash flow.

I have a VERY unique business plan, that is centered around a transient lifestyle and self management. While it works great for me, it is not for everyone. We are long term investors. By investing in higher class real estate I have created my own type of turn key rentals able to be self managed from a distance that will provide cash flow for early retirement in 15 years. I have a lot more articles and information about my style/business strategy is located  my website.

My point in my response was just that a 1400 sqft house that rents for $1400 will not mean a 2300 sqft would rent for $2,000. My 1350 sqft house rents for $1150 and the townhouse down the street (like 15 houses down) that is 1800sqft rents for $1250.  

Good Luck!

Thanks for the explanation!  Good luck on getting that price.  I am trying to stay away from homes older than 1970, just because I think the expenses and time to fix stuff is higher.  I'd buy newer homes if I could get the right price, for sure.

I'm also planning to buy and hold for 20 years and retire early.

In the first year, do most investors expect a low COC return on their money or even negative? (this is assuming only considering the down payment as the investment, and financing expense, realtor concessions, etc as expenses). The reason I ask is if you do a conventional loan, here it's around 25-2600 through the credit union with excellent credit for investment properties, and then if you pay 3% realtor concessions, and say 5k in rehab, on a 100k home you're already at 11k in up front costs after the down payment.

Originally posted by @Elizabeth C.:

Honestly I would bet that the house would not rent for more than $1600 or so. I know in my area once you reach a number it doesn't matter how big or nice there is a rental ceiling. Also the bigger, nicers houses are MUCH harder to rent. Once you reach that point its the price not size.

I agree with this.  In my area, $3000 in rent does not get you 50% more house than $2000.  It gets you twice as much house, easily. 

Check out rentometer.com and put in the actual address and bedrooms.  This will give you a pretty good idea of the rent you will get.  It will also give you other properties in the same area so you can compare.  Check craigslist.  Call listings and discuss their rentals by pretending to be a tenant.

Rent is the one thing you have VERY LITTLE control over.  If you over improve the property you are wasting money.  Granite countertops and stainless appliances won't get you any extra rent.  If its under improved vs. competition, you will have to take a discount.  So you want to just match your comps.

From the rent, work backwards to what you can afford to pay.  Generally expensive houses like this make unprofitable rentals.

$500 a month in true cash flow is an unrealistic goal if you're using leverage.  If you pay cash you might get there. 

Jon Holdman, Flying Phoenix LLC

As a new investor, I would also want to lower my risk until I learn the ropes of the business.  The rental business has it own ups an downs.  Tenants are Tenants, regardless of what type of property you buy.  

You may still get your desired rent but If they do not take care of things, you will still have to do repairs.  New construction does not 100% mean that the house will be in great shape.  Also, when the tenant does not pay and you are heavily leveraged on the investment, it may put you in a bad situation.  

I would advise that you do a little more research  and do your calculations upfront, even then you should still expect some surprises along the way.

Wishing you much luck as you come to the right investment decision.

thank you very much all for the advice.  Going to look at a property tomorrow.  Looks nice from the drive by,  but up close always surprises.