@Betty Yeo why do you think it’s wrong?
Hello Dana, I've been practicing with different properties and keep plugging in numbers and some times I'm just wondering if I'm using the calculators correctly. Would the posted property be a good investment property?
To get a cashflow like that you're not in a great area, and it's not a newer home. So assume that you're going to get minimal or even slightly negative real value when you sell (home appreciates slower than inflation). That's not bad, just means you're making all your money from the cash flow. On paper that looks pretty good. Just be careful because the automatic calculators don't necessarily adjust your maintenance and CapEx costs accurately based on the type of tenant and age of home you're getting. Also, on a lower value home a $1000 water heater replacement is going to have a much bigger impact to your returns than on a nicer home renting for twice as much. Assume you're going to get less than is being projected. Personally I'd pass, but if you ask 5 people that you'll get 6 opinions.
David, thanks for the input. I completely agree with what your saying. The area I live in is so short of rental properties and houses aren’t lasting more than a day on the market, so I have to make good, but quick decisions. I don’t have a realtor in my corner yet to hop of investment properties before they hit the market. Hope to soon though.
@Betty Yeo Inventory everywhere is tight. I'm in California and purchased a rental in NC recently and am in escrow for two more in GA. I picked one up on off the MLS by moving quickly. All of them have (will have) positive cashflow, and are in -B neighborhoods. So keep looking, you can still find good options.
Just make sure you're putting in really conservative assumptions so the only surprises are pleasant. I'd assume 10% maintenance, 10% cap ex, rent growth = inflation (so zero in real dollars), appreciation within +-2% of inflation (depending on the market). Add in 8-10% for property maintenance if you're OOS or don't want to deal with it. If you're still feel like the investment is giving you acceptable returns you're in good shape (and will probably outperform your expectation). If that looks iffy, I'd give it a long think before moving forward.
Thanks for the insight and assist!