Re: Return on Investment - Landlord Forum thread 119379

Re: Return on Investment by Jack on March 22, 2006 @18:58

LXA,
If you are talking about residential rental properties, your rent formulas for rent and property value and ROI are all fantasy poppycock.

Today's rental market across the US is a widely varied and in some spots, turbulant. You've some strong rental markets where prices are going up, some areas where rentals seem to have died with no qualified tenants, and some that just stay the same.

Here is the formula you can use in a nutshell:
Try to get a higher rent than your total monthly payment.

Now if you have a large multi unit building, multiply the rents and see if they exceed your monthly outlay. Are you subject to limitations like rent control. If so, that's bad.

Some people use the term ROI for "positive cash flow". Is that what you mean? If so, do you mean monthly or yearly.

In my opinion 12% ROI is not bad whether you mean cash flow or cash flow + equity appreciation

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Re: Return on Investment by LXA on March 22, 2006 @23:28

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Jack,

Thanks for the reply. I may be asking a question to which there isn't any answer.

If it helps, I'm looking for a general average for a duplex. As stated, I had heard that 1% of the current market value of a property is a "reasonable" expectation of rent.

In this case, ours is a period home (1840's) in a designated national historic district. I grew up in this home and it's been a duplex for as long as I can remember - an up/down arrangement with full kitchen bath up. Utilities, except for water are separated. It's in a quaint town of 20 - 25k residents with 2 well respected universities within 10 miles of the property. Garage space is included in the rent as well as the use of the deck and a patio with an outdoor fireplace.

The property is appraised at 180K. It is in EXCELLENT condition, but we can't seem to find a leasee who is willing to pay $750 per month for one of the units (approx 1300sf, 2-3 br, full bath and kitchen w/ appliances). In researching other rentals in the area, there are less desirable areas that go for $650-700.

I'm just looking for a starting point to either confirm what I thought was right in pricing rent, or you all can kick my rear for being stupid. If I can't make this work in the near future, I'm gonna throw in the towel and sell the place. Regardless, this is a great site, I've learned a lot and the cost of membership was definitely worth it.

As always, insight is appreciated.
LXA

Re: Return on Investment by Phillip in Western New York on March 23, 2006 @10:35	[ Reply ]

The first thing I would do is pose as a tenant and go searching for other units. I would take note of the square footage, number of bedrooms, neighborhood, amenities, and rental price. I would then keep an eye on whether or not these rentals were eventually rented. This is very important, because regardless of what you research by going, the information isn't very accurate if that landlord is not finding a tenant. This will help to gauge your rental market and help you to get settled on a rental price.

Re: Return on Investment by Jack on March 23, 2006 @14:56	[ Reply ]

I sympathize with you about the market. I am experiencing similar conditions. I have learned that it is taking longer in this market to get places rented. You should be able to get your $750. per month, but only when you hit on the right tenant. The most natural response / advice people will give is "lower the price" if you want to get it rented, but I'm finding that isn't the answer. I am sitting with a vacancy of a nice 1 BR apartment for months worth $900. per month according to comparable rentals. I'm only asking $750.ALL and am still trying to get a good tenant. Do I get calls on the ads? Yes, but not good ones. The local brokers are taking it on themselves to ask a higher price for my unit, but I know from running my own ads that it is really a matter of coming up with the right people. So, the answer is that the market is not flowing with good prospects now and we have to try to hang in there as long as possible to get the right tenants. That's how I see it. I hope it helps.