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Where do you live that property tax would triple as a rental? Around here, the increase would be relatively small with the loss of an owner-occupied credit. I also doubt that insurance would double or triple - you should check with local insurance agents, as well as your local tax assessor.
I'm not sure about insurance, but I assume it would be higher since it's being rented out. For taxes, it's so much more as a rental here in Lexington County and Richland County in Columbia, South Carolina. For $85,000 home in Lexington County, owner occupied tax is $457.09. As a rental, it is $2,092.37!!!!
For Richland County, owner occupied is $652.76, and rental is $2,295.79!!!!
I was wrong on my math, as a rental, taxes are 3 to over 4 times more.
... For taxes, it's so much more as a rental here in Lexington County and Richland County in Columbia, South Carolina. For $85,000 home in Lexington County, owner occupied tax is $457.09. As a rental, it is $2,092.37!!!!
For Richland County, owner occupied is $652.76, and rental is $2,295.79!!!!
I was wrong on my math, as a rental, taxes are 3 to over 4 times more.
Where do you live that property tax would triple as a rental? Around here, the increase would be relatively small with the loss of an owner-occupied credit. I also doubt that insurance would double or triple - you should check with local insurance agents, as well as your local tax assessor.
Not to sure about triple... I do know Hawaii taxes rentals at a much higher rate...
I have a buddy that owns a 4-plex and 3 rental condos. He put 20% down on all of them and utilized 7 yr ARM IO's to leverage himself, and is cash flow positive (net after maintenance and management) about $1000-$1200 on all of them combined.
Is your buddy's property in Las Vegas? If so, this is very much believable. Vegas is one of the few cities where where you can buy newer homes that can be positive cash flow immediately. I have several family members that are in that situation now.
We purchased our home last year in Vegas. We have no no desire to rent it out but if we had to, we would definitely be able to rent it out for a couple hundred more than what our mortgage and taxes currently are.
Our mortgage is $850, 2 families on our street rent is $1350 and $1400 a month. Our home is slightly bigger than one of the houses and the exact same size as the other. $1300-$1450 is about the average in my neighborhood for a rental.
It can still be done finding the mix of factors...
6 months ago one of the investors I know bought a foreclosed home for 87k in East Oakland... he spruced it up... paint, carpet, kitchen/bath vinyl, replaced the broken window panes and removed a dumpsters worth of trash...
The home is now rented through Section 8 Voucher for $1500...
Their are always opportunities... in this case, the home looked bad with trash and about a dozen broken windows...
I'm not sure about insurance, but I assume it would be higher since it's being rented out.
My insurance costs went down by about 30% when I converted my residence into a rental. It is cheaper because homeowners insurance covers the property and the contents while landlords insurance covers only the structure and not the contents. I increased the liability coverage and the cost still went down.
It can still be done finding the mix of factors...
6 months ago one of the investors I know bought a foreclosed home for 87k in East Oakland... he spruced it up... paint, carpet, kitchen/bath vinyl, replaced the broken window panes and removed a dumpsters worth of trash...
The home is now rented through Section 8 Voucher for $1500...
Their are always opportunities... in this case, the home looked bad with trash and about a dozen broken windows...
He is into it about 6 times the gross rent...
In my world that house for 87k is a dog if you can only rent it for 1500 I would not even look at it unless it rented for 2% so 1750 that house is only worth 75k so in my part of the world he over paid 12k plus cleaning and closeing cost.
If you follow the 2% rule you will cash flow
In my world that house for 87k is a dog if you can only rent it for 1500 I would not even look at it unless it rented for 2% so 1750 that house is only worth 75k so in my part of the world he over paid 12k plus cleaning and closeing cost.
If you follow the 2% rule you will cash flow
I guess the majority of real estate I've owned would be considered dogs..
My goal was to buy one rental every year or so and was quite pleased to have a break-even after factoring in all costs... including a maintenance allowance, vacancy factor and return on cash on cash...
This "Conservative" approach has served me well and all but the last purchase are worth well more than what I have in them...
Not the easiest task when I'm located in one of the highest priced Real Estate markets in the United States...
Of course... I have colleagues that won't look at anything without a resident manager and with larger properties... it is much easier to make the numbers work...
Are any of your holdings in the San Francisco Bay Area?
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