LOL, where do homes appreciate 5% every year for 15 yrs?
and no, the $1m gain in your example is not totally tax free. the limit is $250k/500k single/married.
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Is owning a home mostly a bad thing?
- Thread starter nitro
- Start date
LOL, where do homes appreciate 5% every year for 15 yrs?
and no, the $1m gain in your example is not totally tax free. the limit is $250k/500k single/married.
Quote from volente_00:
What state are you in ?
In Texas the going rental rate is ~1% of the home's value.
I am not sure about 1 million dollar homes but 1% is pretty close ranging from $50,000 townhomes to $500,000 homes around the Houston area.
i'm in calif. around my area, the gross cap rate (annual rent divided value of home, before any expenses) is around 4-4.5%. i used to own properties in texas and the gross cap was 8-9%. maybe it's different now, but i never found any place in the country that was 12%
Quote from blackjack007:
i'm in calif. around my area, the gross cap rate (annual rent divided value of home, before any expenses) is around 4-4.5%. i used to own properties in texas and the gross cap was 8-9%. maybe it's different now, but i never found any place in the country that was 12%
I'm sure your area is a lot lower considering the hit the housing market has taken out there.
4 to 4.5 % before expenses ?
No way in hell I would put up with the landlord headache for that little of return.
Here is one example in the Houston area.
I can't find the exact house for rent and for sale but these 2 are in the same subdivision north of houston.
House 1 is 1802 sq feet and is listed at $130,500
That is $72.41 per sq ft
http://irec.lakeconroe.com/content.cfm?HAR_id=240440&aid=25&mlnum=44558304&class=1&cs=5
House 2 is 1,723 sq ft and is for lease for $1350
http://irec.lakeconroe.com/content.cfm?HAR_id=429479&mlnum=55702360&class=7&cs=5
Using the $72.41 above would give you a rough listing price of $124,722
So it is renting annually for roughly 12.98% of market value.
I previously said they rented for ~1% monthly.
Quote from volente_00:
I'm sure your area is a lot lower considering the hit the housing market has taken out there.
4 to 4.5 % before expenses ?
No way in hell I would put up with the landlord headache for that little of return.
Here is one example in the Houston area.
...
So it is renting annually for roughly 12.98% of market value.
the cap rate of 4-5% in calif is normal. it has been like this for decades, even before the bust. if anything, when housing prices take a hit, the cap rate should go up.
yeah, 4-5% sucks and the people who invest in Calif real estate are doing it for appreciation. they just hope to break even with cash flow.
a 13% cap is very good for residential. assuming prop taxes and insurance aren't absurd, 13% would get good cash flow. in a market like that, it would probably be better to buy a home.
Quote from blackjack007:
the cap rate of 4-5% in calif is normal. it has been like this for decades, even before the bust. if anything, when housing prices take a hit, the cap rate should go up.
yeah, 4-5% sucks and the people who invest in Calif real estate are doing it for appreciation. they just hope to break even with cash flow.
a 13% cap is very good for residential. assuming prop taxes and insurance aren't absurd, 13% would get good cash flow. in a market like that, it would probably be better to buy a home.
in California, San Diego at least: For the last 2 yrs, many REOs could/can be had for 8-9% cap rates (usually in the 100-200k price range though). 300s and up+, cap rates fall substantially. This all supports the premise that mid and high end housing has a long way to fall.
And by the way, cap rates are NET of all operating expenses, including property taxes, all factored in. His # of 4.5% "gross" cap is adjusted downward to probably 3.5% or below for conventional cap rate, since it doesn't include prop tax.
My #s are 8-9% AFTER operating expenses... Those are 100% occupied, of course.. (so you can discount that a little bit to your heart's content)
Quote from blackjack007:
the cap rate of 4-5% in calif is normal. it has been like this for decades, even before the bust. if anything, when housing prices take a hit, the cap rate should go up.
yeah, 4-5% sucks and the people who invest in Calif real estate are doing it for appreciation. they just hope to break even with cash flow.
a 13% cap is very good for residential. assuming prop taxes and insurance aren't absurd, 13% would get good cash flow. in a market like that, it would probably be better to buy a home.
I did forgot to include that in the neighborhood listed above in my example there is a $875 HOA fee that eats into that return.
Quote from scriabinop23:
in California, San Diego at least: For the last 2 yrs, many REOs could/can be had for 8-9% cap rates (usually in the 100-200k price range though). 300s and up+, cap rates fall substantially. This all supports the premise that mid and high end housing has a long way to fall.
And by the way, cap rates are NET of all operating expenses, including property taxes, all factored in. His # of 4.5% "gross" cap is adjusted downward to probably 3.5% or below for conventional cap rate, since it doesn't include prop tax.
in san diego, a 100k property would be very low end. those ghetto properties have very high costs, primarily due to the fact they attract dead beats who are perpetually late on rent and skip out after 4 months.. a 5% high-end property is better than an 8% low-end property from my personal experience. that's because the 8-9% cap rate is really closer to 6-7% when you consider the months of non-payment. then add in the make-ready costs every several months..