ah, so this is LONG term investment. how long will you keep a house before selling?
quote:
Originally posted by Fishb8After thinking about this, how much do you make from a rental?
After taxes,insurance, maintenance and management fee how much is left?
The rent I get is about $200 more a month than my costs (mortgage, taxes, insurance, HOA fees, maintenance). That extra money goes directly to the principal. I pay down my note faster, the more equity in the property I gain, its a win/win. When this one is paid off, we are buying another one. That’s the plan anyways, but I have about 8 years for that.
Like anything, there is risk. My renters could destroy the place or once the lease is up I could go without renters for six months and have to pay that mortgage with no one living there. Who knows? It’s a calculated risk to me. Personally I think if its done right, there’s less risk than the stock market and much larger potential gains in the long haul. I’d be very happy if I was to only break even and be gaining the equity in the property. The extra money is a bonus.
Redfish Baron Extraordinaire
Is the house taxed like a vacation home(2nd house) - 6%.
Or is it different for rentals?
6%. In Dorch county, that is basically 3x what the tax bill is if it were owner occupied.
I own two rental properties in Mt Pleasant, Coleman Blvd Area.
One is probably worth 200K, the other 300K. So, neither are very high end but they are both nice and decent places that you wouldn’t mind your daughter or sister or mom living in.
The lower value one presently rents for $1000/mth, the higher value one for $1300/mth.
The best year, I netted (after prop taxes, maintenance, insurance, etc) $18,000 combined. The worst year I went underwater due to maintenance (new roof + some rotten framing + some other larger scale repairs). But most years it was net positive income. Of course, you still need to pay income tax on that net return.
The big advantage is that I’ve got them both paid off. I did that with some good “flips” during the bubble era 2003-2006 and turning the profit tax free into other purchases, finally stopping on these two. I don’t think such fast and high return flips are possible now, but then again things seem to be heating up again. So, who knows?
The big disadvantage I have is that I travel a lot and am not the handy sort, so nearly 100% of my maintenance I have to pay someone to do. Toilet leaking? A few hundred $ gone. Stuff like that.
Another thing is that since I own them, I can keep minimal insurance. Basic homeowners. No flood, no wind, etc. It’s a risk, I know. But life is full of trade-offs.
So, my lessons would be:
-get it paid off and that will almost always keep you net positive (especially if you are ok to have less insurance) and you can sleep easier at night by having less debt
-be able to do some work on it yourself to save on repairs
Of course, getting good tenants who stay for several years is desirable also. I think I could get more rent on both properties, but losing one or two months of tenancy to earn another $100/month isn’t a good trade.
There, now you know the total sum of my knowledge about rental properties! I hope it’s useful. 
"You have the right to the pursuit of happiness. You do not have a guarantee that you sh
So basically you are buying the house as a long term investment. Letting the tenants pay the mortgage. And hope to get more out of it when you sell it, years later. Does that about sum it up?
Fishb8…Yes…that should be the most prudent strategy. Short term flips involve more finding undervalued properties where you can add value, and markup some. It’s nowhere close as easy as the TV shows make it out to be.
I don’t know the Mount Pleasant Market very well, but around here (Greenwood) Native Son should sell his $500k worth of houses, buy 5 houses at $100k each and quadruple his income without much difference in cost. He could hire a property manager and just watch his accounts grow.
At $18k best case income vs $500k invested, he’s around 3-4% capitalization rate, when rental property should be about 10-12%. Conservatively placed in the stock market would be a more lucrative investment for him.
My initial strategy was to cover the mortgage on my first house. I had lived in it and had an opportunity to live elsewhere for free for a while. I am turning that around, but have lost tens of thousands of dollars with that strategy, out of ignorance initially. The market here will accept $2-300/month more than what I’m charging for this property and I’ve had it for a long, long time. The same tenant has been there for 10 years. Initially, it was a passive investment for me with long-term growth of the value of the asset being the target. Now that I’m more aware, I should not have done that. I’m going to cash out and put it back into my business because it is growing to a point that I need to fund some of the infrastructure.
Simple Cap Rate:
$18k/$500k = 3.6%
Target 10% minimum = 500k should bring $50k/yr
BG
I can add plenty of things to a list of what I should have done differently. But I learn something every time. Expensive lessons suck, but they stick.
I do wonder what the rent is in Greenwood? $1000-1300/mth for 2BR places? Keep in mind also that my $500K valuation is based on today, but I’ve owned these places since 2006.
I guess I like having the places close to home. Distant property investments seem worrisome to me.
Are you saying that one should aim for 10% net (after taxes, expenses, etc) per property per year? So, the 100K house in Greenwood you mentioned could clear $10K/year? That seems difficult, but I know how much I don’t know, so would be interested to hear more details.
“You have the right to the pursuit of happiness. You do not have a guarantee that you shall have it.”
Yes. 10% all in vs your current investment, otherwise your cash should be elsewhere.
I’m just saying to have $0.5M in assets making $18k/year isn’t very aggressive.
My point about Greenwood is that it is probably much lower end. To own a $300k rental house in Greenwood is a pipe dream. To own that in Charleston may even be in the normal range.
A Greenwood real-life example:
A client of mine is selling her rental house. Rent is $500/month. Fees are $50/month and taxes are $1200. She spent less than $500 in 2014 on repairs. That gives her a total of $3900 income off of this house. She inherited the house and has considered just recently to cash out and pay her personal house off. It appraised at $30k.
$6000 Gross
-$600 in fees
-$1200 in taxes/insurance
-$500 in repairs
$4400 net
$4400/$30k = 13.0%
Someone with $500k might consider buying 16 houses at $30k and rake in $65k/yr. Maybe do it in Greenwood, I know a good property manager…
I really was just suggesting that the rent on rental houses should be aggressive enough to not have the money elsewhere doing more for the owner.
My point above about my personal ignorance was to imply that I wasn’t aggressive enough early on and have had the same tenant for over a decade. I’m not making enough money if that is the case. The rate is too far below market and that’s why the tenant will never leave. I have to fix that, I wonder if the rates above are in line with the market in Mt Pleasant.
BG
16 $500/month rental houses sound like a monumental pain in the rear. That is being said as a property manager, it COULD be different if I owned them all. That is also knowing what a 30k house in the charleston (it would really be N.Chas, even worse) consists of. I would take 8 houses at 60k that rent for $850/month. All day long. The numbers, on paper, may not add up, but after 5 years I guarantee the investor would be better off.
I know that’s not the point of the conversation, but far too many people crunch numbers in this business, and ignore the reality of things. Low end property sucks.
easy now birddawg, i live in N.Chas and my house is worth a lot more than 60k. No worries though, I get your point. 30k in the tri-county area is going to be LOW end, unless you are real rural.
I know of people that do this for a living, I just can’t figure out how they “live” on this. They seem to be living well, at least from the outside looking in.
I live in N. Chas also (until my house in summerville is done and I can move.) There are parts of north charleston that are very nice. As you know, the ones that are in the 30k range are not.
I always enjoy meeting new people and discussing real estate. If you ever want to discuss this more, feel free to PM me and we can talk more. I make no claim of being an expert, but I am happy to share what I have learned.
quote:
Originally posted by Native_SonI can add plenty of things to a list of what I should have done differently. But I learn something every time. Expensive lessons suck, but they stick.
I do wonder what the rent is in Greenwood? $1000-1300/mth for 2BR places? Keep in mind also that my $500K valuation is based on today, but I’ve owned these places since 2006.
I guess I like having the places close to home. Distant property investments seem worrisome to me.
Are you saying that one should aim for 10% net (after taxes, expenses, etc) per property per year? So, the 100K house in Greenwood you mentioned could clear $10K/year? That seems difficult, but I know how much I don’t know, so would be interested to hear more details.
“You have the right to the pursuit of happiness. You do not have a guarantee that you shall have it.”
For what it’s worth, my place is in Summerville in a good neighborhood, 1500 sq ft, 3 bedrooms, 2.5 baths, 2 car garage on a large lot, built in 2003 and worth probably 160k at most. We get 1350 per month. I clear a little over 200 a month on it. Not looking to get rich, just nice having someone else pay my note down while I collect equity and enjoy a write off. The situation works well for us.
Redfish Baron Extraordinaire
I just looked at Craigslist apartments for rent in Mt P. Wow, I am pretty out of touch with the market.
1BR/1BA apartments for $1100, $1350, $1450. Bigger homes for $3000-4000/mth.
I just realized another lesson: Don’t rent to relatives or friends because it will make it harder to raise the rent! 
haha
“You have the right to the pursuit of happiness. You do not have a guarantee that you shall have it.”
23, good point about the write-off. I hadn’t thought of that.
Native, I’m glad you notice that you are real low for that area, but family definitely puts you in a bind.
I admit that there are several houses in the $30k range that I deal with that I wish didn’t exist for the sake of mankind.
BG
quote:
Originally posted by btodagI admit that there are several houses in the $30k range that I deal with that I wish didn’t exist for the sake of mankind.
BG
Dang, Iv’e been getting advice from a slum-lord.
I know, but it was funny (at least to me)