[quote=exsdgal]Here is a hypothetical scenario if the intent is to purchase a rental property w/o any loans.
Available funds: 400K
Purchase price: ~325K
Repairs/Renovation: 20-30K (before renting the place)
Remaining funds: ~40K (after purchase, repairs, escrow…)
Annual rental income: 25K (about 15 years to recover the principal)
Annual property expenses: 20% (5K)
Would you consider 20K net income/year a good return on the rental purchase? Note – this example does not consider any EOY income tax obligations, time for repairs, appreciation, potential rent increases etc.
In case you find the return to be acceptable… then redfin and craigslist are your friends. Play with the various filters to identify prospective locations/properties. Like others have already mentioned, real estate is a personal preference and the type of property depends on how actively one wants to be involved.
From a turn over perspective I would consider a single family residence is easier to manage. Regardless of the property type to minimize hassles I find the following useful:
– pick a location you are extremely familiar with
– pick a property you will consider moving into (if necessary)
– be ready to learn anything and everything about property repairs (this helps to understand whether to panic/or not during those tenant calls)
– with any repairs pick quality over price for essential items, and compromise on the auxiliary items
– identify a core set of principles for the tenant selection process and do not compromise
– finally set the expectations of the tenants, and try not to let them run your life!
Good luck with your research.[/quote]
Great suggestions, exsdgal, especially the one about picking a neighborhood Eve is “extremely familiar with.”
The MM condo (suggested earlier) not only is narrow enough to emulate a train car inside (notice the sorry a$$ kitchen so narrow that if the oven is open, one can’t stand in front of the sink or open the frig??), it has ~$235 in monthly HOA dues (subject to hikes and also special assessments). Having lived in Pt Loma for an unspecified amount of time, Eve may be completely unfamiliar with the type of tenant who would be attracted to that small condo in (congested) MM or at the speed which it will turn over annually.
Contrary to popular belief here, a well-located SFR in metro SD (urban, if poss), even one which has >=1000 sf, attracts a very high-quality tenant. I think she should continue to pursue small investment properties in 92104, 92115 and 92116, as she may have already been doing and then trying to get an offer accepted for up to 80K less than $400K, so she will have some “rehab” money left over.
Eve, in your price range, I feel if you search in SD’s northern communities (north of I-8), you will get interested families for tenants which are far more “high-maintenance” for the landlord than singles and couples. And SFRs in some parts of Linda Vista (92111), while seemingly “affordable,” tend to attract a more low-income crowd living paycheck to paycheck (or benefit pymt to benefit pymt, as the case may be).
I also think SFRs in your price range in SD’s eastern and southern close-in suburbs attract mostly families as well, mostly who have relatives living in the immediate area.
I don’t think you will be able to find a well-located SFR in “urban” SD in your price range UNLESS you are willing to accept one which is 55-90 yrs old. In CA coastal counties, age really has no bearing on value or desirability as a very large portion of older stock is located in the best locations.
While shopping in “urban” SD, try to find at least a 5000 sf (std) lot and just be sure to have an inspection/engineering contingency in your offer with at least a ten-day window to perform. Yes, even for houses on raised foundations.
If you need a referral to a competent local structural engineer, please pm me.
Good luck, don’t be afraid to underbid the asking price with a 3-4 week closing window and be patient 🙂
