OfflineI have seen this money making from rentals mentioned so often on this site and I am confused as to how you can make money; enough to pay the mortgage on rentals?
We have just come back from living overseas and in the 4 years we were gone we rented our home out. Our real estate agent (scam artist) told us to rent it out at $50 a month less than we were paying on our mortgage so we really lost money. Then when we returned she had not even watched the property and we had over $18,000 worth of damage to fix, which the insurance company did not cover in our tenant insurance. They called it ‘Hard Living’ and not ‘Vandalism’.
So, I thought that we should have rented it out for at least the mortgage as we would have gotten a better class of tenant. Is this a viable thought?
Any advice you could give would be great, anyone!
Deb
debbiejo, you need to look @ what other similar propertys are RENTING for with similar BR's, BA's, and sq.ft., after doing your due diligence, thats how you would come up with your MONTHLY RENTS, whatever your mortgage is, it is. That dosen't mean because your mortgage payment is $2,000 your RENT should be $2,000? It is based off of current market conditions (which favor RENTAL UNITS right now) and what other COMPARABLE RENTS are going for in YOUR area. YOUR HERO, SULLY.
YOUR HERO, SULLY
amount of mortgage payment doesnt mean thats what you rent it for...
but when renting you should try to rent for at least break even.
Don't Wish the Past, Create the Future! - DH
i mean, thats kind of the point, either have the RENT cover the mortgage, or have a positive cash flow on top of paying for the mortgage. I would NOT enter into a deal with NEGATIVE CASH FLOW, were's the deal in that? SULLY:P
YOUR HERO, SULLY
I would do I negative cash flow rental deal is if I was positive that the market would turn soon, and I got it for a steal...I would wait it out and take a small loss each month until pay day (when I sell it)
Don't Wish the Past, Create the Future! - DH
it would litterally have to be on the verge of a huge upswing, before i go and make a deal like that. SULLY.
YOUR HERO, SULLY
sully is right.. NO deal unless you are getting a ton of equity (ie buying below market) and plan to sell it soon or raise rents.
Here is how you make money in rentals.
1. Cash flow. Net after paying all the expenses. Tough to get a lot of this from SFRs when you first buy them. The key is that rents raise over time by MORE than your expenses ie for PITI, you PI should be absolutely stable, never changing. The only reason your monthly payments should go up are because of TI. Insurance is not a huge expense/problem in most places (exclude say, Florida).
The killer is taxes. counties and cities are money grabbing and this is going up faster than inflation. Pass it on to your tenants if you can.
2. Mortgage paydown. Tenant pays your mortgage for you and you get richer over time. Paydown accelerates over time. On a 30 year mortgage, this is negligible for many years ie more than 15.
3. Appreciation. (Not much of this lately but now is a good time to buy to get it in the future.) This is huge because you are getting appreciation on the entire purchase price of the property not just your down payment so over time you should expect to make MANY times more than your down payment.
4. Depreciation. A non-cash item in terms of RE but taken off your taxes. So that even real estate that is positive every month, LOOKS negative on your taxes. So you can raise the allowances and keep more of your paycheck.
"getting a ton of equity (ie buying below market)"
exactly what I mean....and I am only talking like 50-100 a month loss
Don't Wish the Past, Create the Future! - DH
I have read your posts and I appreciate the response. I guess it makes sense to check the rental position in the area. I will keep that in mind if I decide to buy to rent.
I am still wading my way through all the information and trying not to sink.
That is just one more step in my knowledge and I thank you both.
Deb
I have saved all your comments to go over again later. They are my on-going notes. I am very pleased to have all this wonderful help.
Thanks everyone!
Deb
I am sorry for my ignorance. I looked in the back of the book but I could not fine the meaning of the acronyms you used. I am only up to chapter 8 so I may not have come to the explanations yet.
What are:
SFRs
PITI
PI
TI
I am guessing that PITI is the PI & TI together?
Sorry but thanks again.
Deb
sfr single family residence
pi principle and interest
ti taxes and insurance
piti principle and interest taxes and insurance
Don't Wish the Past, Create the Future! - DH
http://www.deangraziosi.com/node/3208
What are:
SFRs
PITI
PI
TI
I am guessing that PITI is the PI & TI together?
Sorry but thanks again.
Anita
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TWITTER - anitarny / FACEBOOK - anitarny
"FAILURE IS NOT AN OPTION"
What would I do without your help?
Deb
help, keep pluggen' along, SULLY.
YOUR HERO, SULLY
Thanks to all for enlightening me!
Anita, I went to the link and copied all the acronyms to a word doc along with all my other worthy notes and tips. They are mounting up!
Deb
If you think of any new acronyms that are not on the list, just put a post in there, or anywhere in the forums. As soon as I see it, I go back and edit it into the glossary. That goes for anyone that has a new one to put in or has a question about one. The glossary will continually be growing. It's a good way for us all to help each other.
Rina
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
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good idea, SULLY.
YOUR HERO, SULLY