I have spent the better part of the last year looking for a rental house to purchase. At one point I got really excited and put an offer in on a house a few blocks from me that the bank was dumping for 50% of it’s value because it was missing all the windows. I was really bummed when I got beat out. (There were 8 other offers). The bank dropped the price to $99,000, which pulled in a ton of interest the first day. Months after I missed out on that deal, I looked up the final sale price and was surprised to see someone had put in an offer of $129,000. I had no idea I was so far away on that deal.
Since that purchase attempt, I haven’t found anything that comes close to that amazing deal. It appears that real estate really is leveling off and the deals are getting harder to find. At first I thought, “maybe this is due to an improving economy”, although I think it’s more likely that banks are hoarding their foreclosures to try to protect their pricing. I’ve read a few articles lately that point to banks holding lots of inventory. There are still a ton of houses in foreclosure or headed that way but the banks are working hard to keep more houses from entering foreclosure and are being more flexible (slightly) in making deals with their customers. Chase and others are even proactively contacting some of their customers to offer “no cost” refinancing to lower payments. (They are getting huge bonuses from the government based on how many they do).
So, here I sit. Bummed that I didn’t get that amazing deal and frustrated that I haven’t found any others that really jumped out at me. I suppose I could loosen my criteria on what I want in a rental property. I remember years ago thinking that if I could just find a rental property that would get me within a couple hundred dollars of being cash flow even, I’d consider buying it. I felt like it was worth having to put in a couple hundred a month if someone else was helping to pay down the mortgage on the property. Now, I’m not interested in buying a rental property unless it can give me a positive cash flow of at least $300 a month. It’s funny how times change. I’ll keep looking but I’ve kind of given up at the thought of buying something now. With less inventory on the market to choose from, and higher prices on what is out there, it just doesn’t seem worth it.
When you say $300/mo cash flow positive – just curious what your factoring in – I would assume taxes, mortgage payment on 75-80% of property value, insurance….but would it include repair/maintenance, prop management, or other reserves?
I’m just considering the principal, interest, taxes and insurance. I figure the $300 a month extra would go in a reserve account to deal with maintenance items.
Ok gotcha. I grabbed my last rental with ~$200/mo positive cash based on that, but would agree ~$300/mo would help ensure your getting compensated for your time investment.