Posted by GL(ON) on January 17, 2003 at 11:06:43:
The property is way overpriced. Do an archive search for “GRM” and “Cap rate” or “capitalisation” and you will find this subject has been thoroughly explained.
By the way there is nothing wrong with rentals for long term investment with a big, big payoff in 5 10 or 20 years. Many people who scramble around doing flips etc, would make a lot more money with a lot less work in the long run, if they just bought a few properties and held on to them.
Triplex and increasing value - Posted by Joshua
Posted by Joshua on January 17, 2003 at 01:45:25:
I know that most people say that rentals are the worst way to start the business of REI. But I’ve come across this and can’t stop thinking of getting into rentals first then increase value and trade up to something bigger. Then just keep repeating the process. There’s a triplex for sell at 195,000. Annual taxes are 964.
Monthly rent is as follows
unit 1 4bd 2bth 1699sqft rents for 600
unit 2 2bd 1bth 852sqft rents for 450
unit 3 2bd 2bth 1045sqft rents for 500
So that’s a total of 1550 per month.
The property is in a desirable part of town.
Unit one could be renting for 750, “others around this size are going from 750-925”. Unit two gould be getting 500, this is what others this size get as well. And lastly unit 3 could be making 675, the place I’m staying is similar in size but is not in that good area and it I am paying rent for 675.
Now given the current rent what should this property be priced at? I’ve read that using the cap rate will help me to determine what the property should be worth. But I don’t know how to get the cap rate of the property.
And considering the rent increases wouldn’t that add value to the property because it is a rental property? Or since it’s in a residential area would it be hard to increase the value much by doing this?
Thanks for the help,
Joshua