I have always used the rule that 1% of the retail market value should be your rent taking into consideration what the other houses are renting for in that neighborhood. This formula does not work on high end and low end homes. Example, if you have a 500k house the market may not bear it renting for $5000 and if you have a 40k you will most likely get more than $400 per month which is the reason more investors hold lower priced homes for their rental portfolio. I am personally looking for resale value and feel I will make more in popular middle income neighborhoods during resale and take the loss in cash flow. As I expand my portfolio and wish to slow down with my other business I will be more focused on cashflow.
When investing in single family homes to rent what kind of cash flow do you look for? Example an $85000 house. 10% down $8500. Principle, intersest, taxes, and insurance $665 per month. $50 per month misc. TOTAL $715 per month expenses.
Do you do any deal that will be cash flow positive by any amount? In the example above what is the minimum rent you’d want before doing the deal?
Cash Flow is only one of the profits made on rental
properties. If I can buy it 7-10% below market value
and put zero down, and roll my closing costs into the
loan, it may not cash flow the first year. But I have
saved my cash for emergencies or another deal.
Either way, you still get appreciation, depreciation,
interest deductions, etc. etc.