Rental Analysis

[Account Closed]

As some know I mainly flip. But a buy & hold friend of mine has a property he just picked up he needs out of ASAP. No real room to flip. But rental numbers look interesting.

Single family 3/2 1128 in California. Lower income area. 1978 year home was built.

Sale Price 120,000 - needs 5K work.

If you put 25% down. Assuming 4.5%

1.25% property taxs

$40 a month insurance

Your payment all in is PITI = $700

Property was last rented for on MLS for $1550.

Thoughts. Seems to hit the 50% rule.

[Nathan Emmert]

Originally posted by Mike P.:

Interesting. Now I see why people don't preach rentals on here that are in California.

Remember, there are two types of rental investors... buy and hold type investors looking for long term passive income... and shorter term investors looking to cash out with equity gains.

When the market picks up, I'm guessing homes will appreciate faster in value in places like California and New York then they will in places like the boonies of the midwest. If those investors were willing to accept lower cash on cash returns in the short term, they may well have opportunities for a nice equity cash out windfall in 10 years. I will likely get a nice 15 or 20% cash on cash return, but the equity increase in 10 years isn't likely to be all that much. Everyone has different goals.