Real Estate... is this a buy?

Doing some basic reasearch, is this the condo in question?

http://www.zillow.com/homedetails/7920-Merrill-Rd-UNIT-1607-Jacksonville-FL-32277/71042518_zpid/

http://www.realtor.com/search/listi...36988adee23453&lid=1104426041&lsn=3&srcnt=106

Looks pretty nice to me. I don't know anything about Jacksonville and area though to know if it's a good area.

You might want to double-verify that you could really get that much rent for that unit. Since the prices to buy have come down, rents could head in that direction even if they haven't already.

JJacksET4
 
Quote from zboy2854A:

Question--how long have you been a rental property owner?

IME, the 2% formula as I said is a conservative formula, but it is conservative for a reason. I've seen the majority of landlords get burned out or sell out because they were too optimistic with their numbers, or didn't fully account for vacancy, repairs and upkeep and all the other unforseen stuff that inevitably comes up to eat into your cash flow over time.

My mentor taught me this early on, and while yes, you do have to look hard for the right bargains to find properties that will meet this formula, they are out there. Especially now, where rents and property values will most likely continue to fall, it is more important than ever to be conservative.

I personally have 3 rental properties that fit this formula that are professionally managed (and no, they're not in war zones), and I'm glad that I did because it's the unforseen crap that kills you, but because I put in a large enough cushion I've never been in danger of having negative cash flow.

The key is to not be afraid to make a lowball purchase offer. My most recent purchase was a SFR with guest quarters that the owner was asking $299k, and I offered $150k, and he took it. Cash flows easily.

This isn't to say that you can't cash flow with a smaller percentage in the formula (1 or 1.5% of purchase price), but especially in this environment I prefer to be extremely choosy about what I purchase. YMMV.
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Please tell me the general localities where you are doing 24% annual rent revenue vs cost ?

I just picked up these rentals a few months back at 60%+ off peak here in San Diego (with annual yields above 10%) and my cashflow is very generous ... If I choose to funnel all of my revenue back into repaying debt early, I'll be in 100% equity position in 10 years. These were all lowball offers on bank owned foreclosures... Of course, I am managing them myself.

I've leased properties to tenants off and on over the last 5 yrs though...
 
Quote from zboy2854A:

As a property investor, I use this basic rule of thumb for rental properties:

Purchase price * 2% = monthly rent required
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As a residential property investor for the last 25 years, let me say that is a totally unrealistic. So, In order for me to buy an investment property for say $200,000, I have to get $4,000/mo. rent? Please, please, please, tell me where I can do this. I have 700K in CD/s and MMs, I would love to get $14,000/mo. income buying some rental properties. Get real. Anyone that can pay $4,000 per mo. can get a mortgage and buy their own $200,000 home, and his and hers BMWs.
 
By the way, let me add maybe 1.5% is a necessity in most areas since prop taxes, insurance, dwelling and maintenance is much higher than in CA.
 
Quote from scriabinop23:

Please tell me the general localities where you are doing 24% annual rent revenue vs cost ?
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My properties are in Hollywood Beach, FL. As I said, I am extremely conservative and probably looked at and made offers on 100 properties to get these three. But that's okay by me.

I just picked up these rentals a few months back at 60%+ off peak here in San Diego (with annual yields above 10%) and my cashflow is very generous ... If I choose to funnel all of my revenue back into repaying debt early, I'll be in 100% equity position in 10 years. These were all lowball offers on bank owned foreclosures...

I've leased properties to tenants off and on over the last 5 yrs though...
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As I said, if it works for you, go for it. I prefer to be extremely conservative, which in this economic environment where rents and values will likely continue to fall is the only way I feel comfortable buying properties right now.

In a normal, flat to rising market, I might lower my formula to 1 to 1.5%, but not in this market. But that's just me.
 
Quote from trendy:

As a residential property investor for the last 25 years, let me say that is a totally unrealistic.
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And in the past 25 years, how many economic environments have you seen like this one? Yup, didn't think so.


So, In order for me to buy an investment property for say $200,000, I have to get $4,000/mo. rent? Please, please, please, tell me where I can do this. I have 700K in CD/s and MMs, I would love to get $14,000/mo. income buying some rental properties. Get real. Anyone that can pay $4,000 per mo. can get a mortgage and buy their own $200,000 home, and his and hers BMWs.
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I guess I should ignore the fact that I purchased my properties using this formula then?

The facts do not require you to agree with them for them to be true.

The fact is, in this economic environment, whatever the prevailing rents are would dictate the offer I would make on the property. So in your example, no, I wouldn't pay $200k. I'd make a much much lower offer.
 
Put me in the camp that doesn't buy what you are saying.

Are you saying that the $150K property you just purchased rents for $3K/month???? That's just not believable.
 
Quote from ralph00:

Put me in the camp that doesn't buy what you are saying.

Are you saying that the $150K property you just purchased rents for $3K/month???? That's just not believable.
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Again, the facts do not require you to believe them for them to be true. Believe whatever you wish.

The properties I purchased all happen to be SFR with separate efficiencies/guest quarters, which allow me to have 2 sets of tenants per property.

Getting back to the original poster, given that the prevailing rents are $800/month, all he has to do is offer the bank $50k for the property and the formula works. Will the bank go for it? Maybe not, but then again maybe they will.

You'd be absolutely shocked how desperate sellers are out there. I mean, I just purchased a property for 50% of what the seller was asking, and whose asking price was 50% of what it sold for 4 years ago!

The deals are out there, you just have to be unafraid to make absolutely ridiculously low offers.
 
Quote from scriabinop23:

The HOA will be much higher likely. Here in CA even without landscaping, esp. with a smaller HOA it is $250-$300 starters. Find out. Ziprealty will show you the HOA fee (free to sign up). And HOA fees are hard to pass to your tenants. Often they include water, but you can't pass the water component (since it isn't divided by actual use of your unit) to the renter directly.

And find out whatever coverage you have to do for flooding. In CA, most often the HOA covers the physical building, but in FL things may be different considering the hurricane risk ... Regardless you must still cover your part of personal contents (likely drywall, flooring, lower level of cabinets, etc) esp. if this is a lower level condo.

Go single family.... Where do you live btw? I know some great deals in Socal I can guide you to and have experience with this (have done 3 of them recently, including renovations etc). (heh, i'm not a real estate agent if it sounds like that... i just have some enthusiasm about it)
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Please let me where I can find those properties with 1% monthly yield in San Diego. Which area and zipcode? I have been looking in SD for quite some time. Are they older properties that requires a lot of reserve maintenance cost?

I like to buy a rental property in SD now with the plan to move to SD after 5 years.
 
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