So I've considered buying a new home development in my area. It's a primarily military area, those that aren't typically work at a major hospital near by, rents run between 1700-2k for houses.
I work with a guy who rents on the street I was looking to buy in for 1800 a month(1700 sq/ft house).
Home prices range from 140-160 and I found a good number for sale online right at 150k with closing costs paid for by builder.
So doing the numbers:
25% down = 38,750k
116,250 loan at 4% = 555 P&I/6,660 yearly
Taxes = 274 monthly (based off 80% value, taxes are 2.65% in this area)/ 3288 yearly
Insurance = 67 monthly/ 804 yearly
Monthly rents: 1800
Debt Services: 6,660
Income: 4,140 monthly or 345 monthly.
COC ROI: 10.68%
Military are a typical turn over of 2-3yrs. When they get PCs'd to another duty station. My main concern is they usually have 2-3 kids.
Is that a good deal in general?
I had thought about buying a house in this area about 6 months ago before I got the idea to purchase a quadplex, so I held off. Now that I've been reading these forums and have a little more education, I'm just checking my numbers to see if I've got the analysis thing down for the most part.
Thanks for your time folks :)
I don't have enough info to advise nor am I familiar with the market, but at the rents you suggest, I believe you're target market from the military will be E-8/9s and field grage officers who won't be PCSing in 2 years. Check with post housing and see if there are any COLA adjustments, I don't think you're in a high cost of living area and check on availability of housing for upper grades. :)
To really analyze the deal, you'll want to factor in a few things (i.e. repair expenses, vacancy, etc) that you may have overlooked from your numbers above.
Try searching for "50% rule" on here, or check out this (rather long) sticky thread to get an idea of things you'll want to consider:
I had considered the high cost of rent vs the rank structure and the 50% rule. I don't know -why- the rent in the area is so high, and I honestly don't know why military people purchase in this area but they do. Maybe i'll e-mail a few realtors and see if I can dig up some info.
From my experience living in a predominately military area, military people often buy and rent too much home for what they really need.
A lot of guys see a BAH amount and automatically think its OK to rent or get a mortgage for that full amount.
Great for us investors but it's been the downfall for a lot of young military people that I've seen.
I know multiple brand new officers who rent $1,300/month one bedroom apts (not including utilities) with additional $150/month garage fees. BAH for new officers in my area = $1,400 +/-
I know because I was that very same officer just a few years ago. Thank goodness I wised up quickly!
$345 monthly cash flow based on the 50% rule and your high rents is fantastic. Over 10% return is also good. My only concern would be, can you sustain over a long period such high rents!
Yeah, I've done some digging and the rents in the area vary from 1200-2k. So I'm definitely looking into purchasing one or two when I get back. I -might- purchase one with a VA loan, but that would cut down on profit margin, plus I hate that it adds its own funding fee.
Granted, it does save me the 20% down, i just hate all the extra funding costs and such. Lets see how the market acts in the area by the time i get back in october.
I have to be honest, I am a little surprised to hear a 1700sqft house is renting for $1800. I have an idea of the area you are talking about and it just seems high to me. Do you know if there is anything special with this house or the area around it?
My primary focus area is just west of the area you are focusing on (assuming my assumption is correct) and I would say the average rents are between $1k and $1.5k for a similar sized house.
As @Will Barnard mentioned, my primary concern would be the sustainability of the rent levels. I drive around my primary focus area almost on a daily basis and I am seeing more and more for rent signs going up each day. I would definitely recommend you get in touch with a Realtor who knows the area to get a proper rent analysis.
PS: I'm also a little leery of the construction quality of some of those new homes. Just my opinion.
PS: I'm also a little leery of the construction quality of some of those new homes. Just my opinion.Good point, make sure you take a real close look at the builder.
Yeah, I've spoken to a lot of guys who've bought houses with a few different builders (about a full company of guys i know own homes on the east side, most bought brand new). So far the general census says that classic american is the best bang for the buck and no building issues -as of yet-. most of the guys i've spoken to who own property out there have only owned their homes for up to 2yrs max so far.
I've been doing the homework in the area too, so far what you're saying and what i'm see'ing correlates, mostly 1.2k-1.5k with a few but far between above that price that i've seen for rent in the area.
I'm just keeping an eye out on the internet for possible locations in EP for once I get back right now. Haven't seen any real 'deals' online as of yet, I imagine it'll take a lot of marketing to find the good ones.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing