2006-10-28 16:28:42 · 6 answers · asked by nightrider 1 in Business & Finance ➔ Renting & Real Estate
One thing you definitely want is a positive cash flow. Don't fall into the trap of buying a "negative cash flow" property with the expectation that you could raise the rents and get the thing back to the positive cash flow.
Only buy properties that already HAVE positive cash flow. If you're focusing on single-family homes, you may want to set a goal of $100 or $200 a month positive cash flow. If you're in a high-rent area, maybe more.
You can buy the properties no money down, thus making your rate of return INFINITY.
2006-10-28 19:10:39 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Ouch! Housing prices have fallen sharply in most markets during the last 3 months - in some places more than anytime in the last 35 years. W/ little down, you could find your mortgage costing more than the house is worth.
Unless you have 3 months income logged up in a secure investment like cd/money market - I'd hold off. Remember you have not only the interest rate but also liability insurance and the like to pay. W/ less than 20% down, the bank will cause your payments to include the property tax and property insurance.
How will you cover the payments in between renters - during restoration? How do you intend to find renters? Are you aware of the legal restrictions in which renters you accept? On how you "release them" - are y ou financially able to ride a no-rent 4 month eviction process?
You might want to try a mutual fund dealing w/ mortgages if you believe in the housing market. Redwood is such a fund w/ a solid return through the years.
Blessings,
2006-10-28 23:39:32 · answer #2 · answered by Joe Cool 6 · 1⤊ 0⤋
You only know rate of return after some period of time. Most folks would expect a rate of return to be over 10% because there is also a risk it could be substainlly less or even cost you money. The more important aspect is cash flow. Most folks who own rental property are willing to have negative cash flow banking on appreciation of the property but it may not appreciate.
2006-10-28 23:37:10 · answer #3 · answered by roger w 2 · 0⤊ 0⤋
It's extremely hard to not loose money on a rental that is a new purchase. You can only deduct the interest you pay against income, and between maintenance costs and the cost of ownership you would be extremely lucky to break even.
2006-10-28 23:43:25 · answer #4 · answered by dulcrayon 6 · 1⤊ 0⤋
Anything with a CAP rate over 5% in a downward market because you would be better off putting your cash in a 5% bank CD.
Regards
2006-10-28 23:33:41 · answer #5 · answered by Anonymous · 0⤊ 0⤋
It depends what your investment goals are.
2006-10-28 23:33:56 · answer #6 · answered by mikeyc06010 2 · 0⤊ 1⤋