thanks henry, now I understand. My definition of a good tennant is different from yours, I have lower standards and our rentals are small or cheap. It would be harder to find people with over 700 fico and 80k income because they often just buy their own place.
paramount, I know you didn’t cherry pick the data, I just think you are overly pessimistic, but I’m overly optimistic so the reality is probably somewhere in the middle. I do not think your rental is a “stinker.” It’s not ideal, but it’s not terrible. That is how it often is, you lose a little money each month for a few years in the beginning. Even if values were to rise, rents don’t usually rise with values, so this will not get better quickly. But in my experience, I regret letting two houses go in the past that were very similar to your situation. I would have lost $200 a month for a few years on one of them and then broke even for a few years and then made a few hundred for a few years and it would get better and better. Had I kept it, right now the rent would be double what the payment was, I would only have 9 years left on the loan and I figure I would owe less on it than most people pay for their cars. In 1991 I paid 130k for that house, the value has ranged between 90k and 400k in those 21 years, it’s probably worth 180-200k now. It would have been a lot of work, there would be years of losing money, but that’s what rentals are about, they are an “investment.” But only you can decide if you can stomach a few years of losses. In the scenario I just gave, over the first four years I would have lost about 10k. By about year 10, I would have gotten that back. But right now I would be making 10k every year off the thing, I would owe less than 50k on a rental that rented for 1500, I would have 150k in equity. If I followed my dad’s theory, once it starts turning a profit, I’d put those profits into improvements and paying down the loan, in all liklihood it would be paid off by now and the real fun would begin. I think he has 2 or 3 with no mortgage, but it takes 20 years. In 20 years there are a lot of things that break, there will be bad tennants and there will be lots of carpeting. They are retired and older so they turned those rentals over to a management company, now they just get checks in the mail, but it’s a long road to get to that place.
The other house I regret not keeping was purchased in 1998, the bottom of the previous cycle, so that one would have been a winner from day one. That just would have been lucky, you don’t always get lucky. It is a rental right now, but I don’t get any money, my ex-wife does. If you ask her I’ll bet she’s real happy about it.
BG, unfortunately redfin usually drops the pictures once they’ve been sold for a while but almost all of the houses in this tract look like that inside, they were built during the era of excess. I agree paramounts house is easier to rent, I do not think the larger and nicer ones are good rentals, they do not pencil out as well. They rent for about 2000 to 2500 but there aren’t many for rent and there arent many renters in that price range that wouldnt just buy since it’s actually cheaper to buy. But to address your question of my value having risen, it is true mine was thrashed, I did fix it and improve it. I did the work myself, but if I paid someone else I’d guess 20-30k. I probably spent hundreds of hours and maybe 10k or so, hard to tell, I did it one thing at a time. But that’s not what prompted getting rid of my PMI. My longtime friend/college roommate who is in the mortgage biz and lives locally told me that he had done loans recently in my neighborhood and he said my house was up between 80 and 100k. That I should refi out of my fha and dump the pmi and get a rate of about 1% less. I told him he was nuts, he said his computer program is slightly better than zillow and it confirms it. I was afraid of risking the 3 or 4 hundred dollars on the appraisal if he was wrong. But I’ve trusted him for 25 years and he ended up being right, the appraisal came back showing I was up 90k or thereabouts. It is true I have made some improvements, nothing near 90k, but even if you take that out, it’s still makes me think the market is not dropping. At the very worst it’s flat.
