3700/m on a property selling for 265k? where does this happen?

where i live even million dollar properties don't generate those kinds of rents.

I'm in southern CT - about 90 min from NYC. How could a 1m property not generate 3700/mo? If that's the case than there would be no value in buying a property.

The other thing I wonder about is default rate - if a tenant or tenants decide to stop paying rent, by the time I evict them they will really eat into my profits.

part of it is the capital gains exemption for primary residences, but that's not enough to make it remotely rational. mostly it's fomo because the city's been booming for the past decade. no one cares to listen even if you try to explain it to them. the typical single family pulls less than 3% a year before maintenance, but it's all ok - property values are going to the moon because reasons.


i took a look at some southern CT rental/sale pairings. seems that 10% is more typical. congrats on finding one that pulls 15.

if i was american i'd be all over this stuff.

do a lot of research for every prospective tenant obv, but this is what credit scores are for. someone with a stellar credit score is not keen to let it go to **** for a couple months of free rent. i like getting digital correspondence where all numbers and terms are consented to (preferably from a work account or something with their name attached to it) before going through with it, in case there's question about the authenticity of the contracts.

rent deposits give you a bit of protection, and ideally you'd get last 2 months up front, but it depends on the local eviction process. some places also prohibit you from asking for more than first and last as a rent deposit. where i live you also have to pay back interest on the rent deposit at the end of the lease.

These numbers look fine, but I would suggest that instead of assuming 3% appreciation (which is high, btw), you should instead calculate your future anticipated sale price based on future NOI and cap rate. In other words, the most likely buyer for a property like this will be another investor, and the value of this type of property to an investor is based specifically off NOI.

Surrounding comps play a part, but their values are likely driven by NOI as well, assuming they are also investor owned.

With that in mind, you should factor in the cost of property management with your expenses. Even if you plan to self-manage, you may find that you need to hire a manager one day; and even if not, your ultimate buyer will likely factor PM costs into their expense ratio, and it could impact their valuation of the property.

Keep in mind that there are four major benefits of investment real estate:

1. Cash Flow
2. Appreciation
3. Tax Benefits
4. Amortization

Based on the information you've provided above (and making some basic assumptions about the mortgage), cash flow should be about $10K per year.

For appreciation, instead of using 3% per year, I would run the numbers assuming 2% increase in rents/expenses per year, determine your NOI, and divide by the current cap rate in the area (obviously this could change, but likely not much in the next few years).

Based on the numbers you've given above, with a 2% increase in income and expenses, you'll likely achieve an NOI boost of about $4000 over 10 years. At an 8% cap rate (about what you're purchasing for), that's a valuation increase of about $50,000 over those 10 years.

For tax benefits, you're probably looking at about $7000/year in depreciation (assuming about 75% of the purchase price is building value), which translates to about $1400 in cash-in-your-pocket if you have an effective tax rate of about 20%.

Finally, you'll get amortization benefits as well (principal pay-down of your loan). Assuming a 30-year amortized loan and the terms you indicate above, you'll accrue about $40K in amortization over 10 years.

So, all said and done, the total value provided by the property over 10 years is about $100K in cash flow, $50K in appreciation, $14K in tax benefits and $40K in amortization. Total of about $204K in financial benefit.

Assume 10% cost at resale (about $30K) and your looking at about $175K in total financial benefit. On a $66K investment, that's about 13.5% compounded return. (I didn't run it, but my guess is that your IRR will be a little bit lower than this, but still pretty close.)

Long story short, I like this deal...

Thank you for the detailed breakdown. This is probably one of the best deals I've seen come up in recent months so certainly not the standard. What would be the most you'd pay for a property with these numbers? Just trying to gauge where I should draw the line. The other thing that hasn't been mentioned is current condition of the property - there's no immediate concerns to address but I believe the mechanicals/roof/etc are about half way through their life.

We usually ask for first month/last month and 1 month security before giving keys. I think it's rare to find someone that will live in a multi family in a rough area that has great credit/income - 99% will be marginal in both categories. I'm just wondering how we factor that in to our equation as one person who stops paying/needs to be evicted and tears the place up is a major hit.

I like to add up the cash flow, depreciation and amortization, and then want to see at least 15% cash-on-cash return between them.

I own about 200 units right now, and while I was heavily focused strictly on cash flow when I started buying, I'm at a point where I don't really care about the cash anymore, and getting my taxable income to $0 and getting my LTV really low (equity really high) through amortization is more important.

In terms of what you should be willing to pay, that is going to be highly specific to your personal goals based on your purpose for buying the property in the first place. Everyone has different goals...

Contrats on the success aces��

What are some ways to get my taxable income to 0?

If you make a significant amount of money, it's very difficult to reduce income taxes to $0, regardless of what anyone tells you. (I make 7-figures, own LOTS of real estate, and my blended effective tax rate is still about 12%, despite my best efforts of getting it lower.)

But, if your goal is simply tax reduction, here are some ideas:

Make less money.

Move to a state that has no state income tax.

Increase your business expenses to offset income.

Make charitable donations up to 50% of your income.

Max out tax-deferred retirement contributions.

Max out health savings account contributions.

If you're a real estate professional (as deemed by the IRS), buy lots of investment real estate and use the depreciation to offset income.

Use proper business entities (S-Corps, C-Corps) to minimize tax based on types of income and what you need to use that income for.

Focus on income-generating activities that trigger long-term capital gains, as opposed to short-term capital gains or ordinary income.

Minimize your W2 income.

1031 real property investments to defer taxes.

Invest as a limited partner in projects that throw-off tax credits.

Roll investment gains into opportunity zone investments.

Use leverage for investments and business assets -- you can deduct the interest.

Late march I posted a question and got a few non troll replies. I settled with what felt right and it was spex, so thanks to op for his alpha real estate moves and to you land grabbers out there

If your in a market that has $300,000 homes renting for $1800 per month should you just realize this market is not worth investing in for the time being?

I don't even see how this could be possible unless taxes are very low or appreciation is very high, otherwise it wouldn't make sense to ever become a landlord.

$120,000 for 4 spot mobile home park. Current total rent is $24,000 per year. Does this seem to good to be true?

A couple hundred bucks (pre tax) per crack head, per month, doesn't seem to good to be true.

What are the expenses? Who owns the trailers? Who pays utilities? Is there deferred maintenance? Who will manage it?

Need to run a full analysis to know if it's a good deal or not...

I might have a recommendation, but I can't figure out the specific question you're asking. Recommendations for which part of this?

Changing the use as he describes doesn't trigger any tax in the USA.

More likely numbers:

$3700 gross rents
$1,480 expenses (including vacancy)
$1,012 mortgage payment if you can get a 4% 30 year loan which seems doable right now.

That'll give you about a 9% COCR. I don't pretend to have any skill in projecting appreciation. Then you get tax benefits and principal pay down of the mortgage on top. So that's the baseline for you to decide if this investment meets your goals or not. Whether its a good deal or not is entirely subjective based on what you're trying to do.

As a principle, the amount of taxes you pay for wealth generation has way more to do with how you earn money than the amount of money you earn. The tax code is bizarre.

Happy to help!

$500 rent per unit for MHP, I'd assume they're paying to rent the homes not just lot rent. Renting mobile homes is something I've done before and it's a huge pita because they're just built so shitty. What you want to do there is sell of the homes on contract then lease the spots. I like MHPs. It's very straight forward to add value to them, but they're a pain in the ass.

Two qualifying things I'd be looking at are 1) expense ratios and who pays what, and 2) lot sizes. If you decide to go forward with this deal, post more specific questions. I was in the MHP business for a while.

Would you ever purchase a rental property to hold, that does not cash flow (basically nets a few bucks a month cashflow after taxes when you have 15% down in the deal as well) for future re-development and appreciation growth?

Obviously just breaking even doesn't factor maintenance + vacancy (highly desirable area a cardboard box could be rented in) but I would anticipate redeveloping after 4-5 years.

I live in a highly appreciating (historically and currently) RE market basically, and this is a 1,500 single structure duplex that doesn't make sense to redevelop now since it has been lightly renovated recently (though the structure is 40+ years old), but it sits in a great location and the lot would allow for future development of two separate structures on the land totaling 3,600 +/- sq. ft. total (two separate non-attached duplexes of 1800sq. ft+ each) per city code. The only way to really achieve this that I see is demoing the existing property, so rehabbing and adding on and building a second structure wouldn't make sense.

The price tag is just way too high, and its challenging to find any cash flowing rental properties in the market I am in but I am very interested in new construction long term.

I wouldn't buy a negative or break even property in the hopes of someday being able to make money on it in the future. I'd just find a deal where I could make a good return right now. If I couldn't find a good deal I'd be looking at other markets or just not investing rather than taking on massive liability and debt with no corresponding increase to my income. If you want to get into the property development game, check out the Urban Land Institute, they have the best information for that type of investing.