Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I have one sfr I paid cash for, I'm in it 75k. I get $750 per month for it. It's never vacant. property tax/ins is roughly $150 per month. So my ROI is $600 - 9.5% ish.
I have another with a mortgage, I'm in it for 40k. I get $950 per month and it's been vacant a total of 2 months going on 5 years now. It costs $550 per month to pay the bank/taxes/ins. So my ROI is $400 - 10% ish.
I have another with a mortgage, I'm in it 20k. I get $1150 per month from it and is stable like the others. It costs $540 to keep. So my ROI is $610 - 35% ish
Wow, I want to slap the people creating sites/articles that are spreading such ridiculous information. 15% ROI is nonsense. This claim is in line with the infomercials saying "spend $50 on my book and earn $5K a week working part time!!!!" I'm in Broward and I have extensive knowledge of the Tri-county area in terms of what ROI you should be getting. Your 5-7% return for a SF home is average in the tri county area. So your doing just fine. A SF earning 9% is a really good ROI in our area.
For condo's/apartments the average is 6-8%. An ROI of 10%+ is really good for condos. For example, I have one condo earning 11.4%. Now there was a time when you could earn 15% ROI on a property in S. FL. However, this period lasted only 4 years in the last 60 years. Anyone who was a savvy real estate investor and bought certain properties roughly between 2008-2012 made a KILLING on ROI. I know two of these guys personally. But this was just a fluke period. Btw what sites are you looking at? I have been on many sites about ROI and none of them made such unrealistic claims.
I don't buy unless I'm getting at least 12% so 15% isn't that far out there. My numbers are full cash in including renovation costs and costs to acquire and I will get at least 12% and that is based off of an estimated 5% vacancy. If I run lower my returns are better. It is a bad way to look at a purchase though because there is more to it than that, like here age of a roof or AC are major factors for me.
New investors won't know what to look for on properties which is why I hate all these people making money off this type of advice. The condition of the home and the expected repairs are much more important than any ROI on day one. But hey I'm small time with only 20 rentals so what do I know.
Wow, your talking some serious apartment complexes there. I don't think anyone here is discussing anything like that. $7.5-11 million is likely out of anyone on here's budget. Sounds like you have been very successful if you "average" that many apartments, meaning you likely have 3+ of those buildings. If that's really true, I definitely will be paying attention to advice you give in the future.
Ah, that has to be it. Can't be houses or duplexes.
AZ Manager........Can you give me an example of one of your rental's and how you receive 12% ROI? Perhaps you could provide purchase price of unit (Condo or single family home?), repair costs, then what the unit rents for and what your prop taxes are. Also could you include your location of the unit.
I understand your point on keeping initial investment costs (price and repairs) as low as possible, but I'd just like to see your example to compare to mine.
I have purchased all of my homes in So Florida in 2010 & 2011 so I was very lucky with the timing of the market and house prices, but many of them were foreclosures where people were pissed off and ripped the place apart, so repair costs at times were high.
I wont go into too many details about any properties I own because it is too easy in AZ to find someone with that much info if you know where to look. One I picked up in 2010 I got for $120k and it cost me another $6k to rehab it, I am a carpenter and I do have connections in construction so my cost here will be low compared to most plus the economic climate at the time brought repair costs down. Cost to acquire on that home was $40k (this includes down, closing costs, and repairs) so after property taxes and insurance, no HOA, in order to get 12% I would need a monthly rent of $1,076 and it rented for $1,100 at the time and $1,350 now; if you had to pay retail now for the repairs it would be about $50-$100 more to meet that 12%. In the 6 years I've had it I have had to replace the AC unit, $5k, and do minor repairs between tenants, an interior painting is only about $1,200 which I've done once so far.
Property taxes in AZ are pretty low, on most of my homes they are below $1k/year. As for insurance I have an umbrella policy and individual coverage on each house that is $75-$125/month, on something like the example above it would be on the lower end.
Now that example was a 2010 purchase my pre-tax ROI was 14.36% @5% vacancy and I average 1.58% which brings it up to 14.87% currently the cash flow is $750/month which equates to 22% ROI on the initial purchase excluding all repairs since then. I would have to update my spreadsheet to figure it out after repairs where the rest of the info I have from when I purchased is already available. There are still good finds out there if you know what to look for, I was just shopping for another one not that long ago and found a few but decided against it; my last purchase was in the 4th quarter last year and I'm getting 13.14% currently on that.
Ah, that has to be it. Can't be houses or duplexes.
Yes, we go after high rise apartment buildings that are not measuring up to their potential. Usually this is because the current investors are too cheap to put any money into the building or amenities while trying to reap maximum rent. Usually we step in when the investors are just frustrated that their property isn't living up to their fantasy returns and they want to unload it because they see it as a dog. Most likely they were focused on ROI!
Thanks AZ Manager. I appreciate your time. I think two important things help you out a lot to get very solid returns. The first is you can do many of the repairs yourself. Secondly, your property taxes in your area are pretty darn low.
I think your right thought in that, focusing on the initial investment like purchase price of home and repairs is key. I wish I was out West, but East coast COL and esp property taxes are brutal in many areas.
I am in your same situation; no mortgages. I net 7-9% annually after all expenses. However, I do one upgrade annually on each property when there are no compelling repair issues needed to keep the properties updated. It might be something like replace a vanity cabinet or some flooring or fixture, but every property gets something.
Thanks WorldKlas. Yeah, there's always something with these rentals. New garage door, tenant wants a fence around the property, new AC unit, painting something each year. I still get around 7% return net, plus the appreciation of the home each year, so I'm happy. Could I make more money on the markets? Perhaps, but I'm concerned with an eventual crash, and I also HATE the idea of hiring a financial advisor to take control of my cash to invest, when all they really look out for are themselves.
I won't assume people aren't hitting those numbers...I think it's possible in some sketchier areas of low-cost metros (including here in Jax)...but I do wonder if they're calculating for deferred maintenance, vacancy, and some other things. In any case, you're in line with what most people want. We have hedge funds buying from us seeking 10-12% gross, and more like 6-8% net. And they are not expecting appreciation on those numbers, it would be nice, but they don't mind if we tell them the neighborhood isn't likely to appreciate much.
Rabrrita...75k for over 3k/month?!?! What is your secret?! I would purchase your guru course!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
