Anyone know how the demand for renting out a large home (5,000ft) (fit in)

[bmw335xi]

I'm looking into buying an upscale home in Dr Phillips that is over 5,000 square feet as an investment property. While my intention is to sell it for a profit in the future, I'd want to rent it out in the meantime (maybe 1-5 years, no limit or deadline), but don't know if there is any demand for home rentals of this size. I probably would need to get at least $3,500 month for it to be worth it, anyone know or think of this figure is reasonable in Dr Phillips?

[chopchop0]

Hope you can afford making payments for several months between tenants.

There is a smaller group of people who can buy/rent those homes, so it can take longer to get someone in.

Bottom line, wouldn't do it unless you're able to make payments during those longer expected in between stretches. Those higher end homes can take several months to sell as well.

Many people in that bracket would rather put that rent payment towards equity and afaik, nearly all upscale communities in DP prohibit short term rentals to keep tourists and riff raff out so you won't have that option probably, you'll need to check with the hoa (unless you buy a house without one)

[HokieGCC]

It doesn't sound like it will work. Real estate in FL has been so poor for so long I wonder if you would even break even selling it after several years. I admit to not knowing the specifics about the Dr Phillips area so there could be something I am not aware of but making money on real estate like that almost requires some sort of economic boom.

[BrokerHarry]

I just did an MLS search of the Dr Phillips. I came up with 35 Active homes at 4,000 sq ft or larger. There were 10 priced between $589900 - $875000. Then everything was over $1mil, up to $1.895mil.

If the lowest priced currently active property at $589,900 was suitable (5086 sq ft)...with conventional financing you'd be looking at a payment of approx $2100 per month at today's rates (& that's if you can kick down roughly $118K as a down payment, plus closing costs).

But property taxes are going to approach the area of $900 per month additional.

We still haven't figured in insurance, HOA, utilities, maintenance & upkeep, & potential vacancy factors.

This hypothetical investment might easily require well in excess of $4,000+ per month rent to simply break even. That's $48K rental return per year required, minimum, with zero profit, other than the hope for future appreciation.

And for this, one likely needed to cough up maybe $130K total down, just to get your foot in the Dr Phillips investment door?

Your hypothetical rent of $3500 per month seems low (to me) as a targeted return.

And you're somewhat unsure as to whether the market will even pay that on a dependable basis?

[bmw335xi]

Thanks for the responses! I would be paying cash, so I wouldn't have any loan payments. That is why I figured $3,500 would be sufficient. Basically just have to pay property taxes, hoa, insurance and maintenence (plus utilities when vacant). I've spoke with a property manager who said because of its location, you should have no problem renting it out for $3,500/4,000, but it might take a couple months to find a qualified renter. I know a property manager wants to say, oh yeah it will be easy, so I'm taking his opinion with a huge grain of salt. I just wasn't sure if there even is a rental market for this type of home. I would prefer one year lease tenants and still haven't decided if purchased whether I would furnish it beforehand or rent it vacant.

[BrokerHarry]

I suspect you're late in the cycle (by several years) to expect substantial appreciation on a rental home purchase in Dr Philips.

The cash spent on 1 rental house in a higher end neighborhood (where you otherwise might prefer to live) could likely pull a better return by purchasing several good conditioned homes in more working class neighborhoods, where the rental demand is greater.

No matter what the economic cycle, there is always a rental demand for good clean homes at an affordable price. By paying cash, you can offer the best value & beat out the competition, & hold on to your tenants.

When another down cycle comes, I suspect a higher end vacation style property that appeals primarily to the wealthy may end up sitting vacant, while the more affordable home will remain in demand.

[Arcenal813]

Originally Posted by BrokerHarry

I suspect you're late in the cycle (by several years) to expect substantial appreciation on a rental home purchase in Dr Philips.

The cash spent on 1 rental house in a higher end neighborhood (where you otherwise might prefer to live) could likely pull a better return by purchasing several good conditioned homes in more working class neighborhoods, where the rental demand is greater.

No matter what the economic cycle, there is always a rental demand for good clean homes at an affordable price. By paying cash, you can offer the best value & beat out the competition, & hold on to your tenants.

When another down cycle comes, I suspect a higher end vacation style property that appeals primarily to the wealthy may end up sitting vacant, while the more affordable home will remain in demand.

This. But then also comes the problems that arise from having multiple clients. If you can deal with it and have the patience for it, I agree entirely with this post.

[bmw335xi]

Thank you guys for your opinions!