I got an email from my agent yesterday saying she has some clients who are looking for a place to rent for a year in my area. She said they are looking for a house that fits mine as far as size, location, rooms, etc. The downside is they have told her that they don't want to spend more than $1000/mo. on rent. She said she could try to convince them to go for $1,050, if it was okay with me. When I got home, I ran some numbers, and even at $1,050, I would be cashflow negative - and this was with NO property management company and VERY LITTLE maintenance. I sent her an email, and told her that the least I could rent for would be $1,100/mo., and even that would be pushing it. So, if the people would pay $1,100/mo. and move in ASAP, we would have a deal. I kind of doubt they'll accept, but we'll see what happens.
Coincidentally, today was the first day my new price reductions went into affect in the MLS. Perhaps now I will start getting a few more nibbles. I found out it was shown for the FOURTH time on Wednesday, but I haven't gotten any feedback from the showing agent on what the house hunters thought.
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Don't be discouraged, Steve, if all you do on your first investment property is break even. I think we only made about $50 a month in the beginning on our first investment property. It's better now--we make about $100 a month. We've been hanging onto it simply for the appreciation and the long-term accumulation of wealth. I have recently thought about fixing it up a little more and selling it with a L/O, though. My stepdad has expressed interest, so we might not even have to advertise.
Thanks Trisha. The one thing I keep having to remind myself is that the money will come. I could hope for $250+ CF/mo. all day, but I definately won't get it with this property in this market.
I just found out moments ago that the people won't be able to look at it until next Monday. They are moving from Houston, and want a large parcel of land to build their house, but haven't had any luck finding one. With time running out, they just want to find a place to rent for a year, and then look again. Might be potential for a L/O, but I think they want a custom-built home of their own.
BTW, their wanting to find land spurred an idea ... I have been looking at tax sales for a couple of weeks now, and found some land very cheap I could purchase through them. I might be able to buy a parcel of land and sell it to them later via my agent. The ROI on some of these parcels are upward of 300%, so I could buy & sell and make a few bucks.
I'll have to really think it through, tho, first.
Hi Steve,
I think you're on the right track. In the process of purchasing my first investment property, I went through much of the same number crunching that you are going through. To help me through the process, I ended up developing my own software. I've since put it online and made it available to all. You can use it for free at my site, RealEstateCritic.com. Please give it a try and let me know if you find it helpful.
Please correct me if I am wrong, but my thinking says you paid the July 1 house payment out of pocket, Right? or a deduction of potential profit. August 1 could be paid by this interested couple. and you @ the end of the year would lose 1200 max. If it sits empty, how many days would it take to lose 1200? Would it not apprecitate more than that over the year? please let me know where I may be going wrong.
Richard - You definately may have a point. While I may be losing $100-$200/mo. renting to these people, it may in fact be less money lost than if I have to let the house sit empty for 2+ months. Of course, part of my thinking is getting the property refinanced to pull cash out to not only pay for expenses to date, but to cushion my reserves a little. My rental rate is being forecasted by the numbers of my refinance. To be honest, I paid $101k for the house, and expect to refinance for ~$115k. (I estimate the house to be worht at least $135k, but it may only appraise for $130k for the refinance. If so, I want to be <90% on that figure.) The $14k difference (115,000-101,000) would pay for "recovery" costs and a few months of holding costs for the house. I figured with a new $115k loan, I would be looking at needing $1,200/mo. to cover everything and make minimal CF each month.
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