Oceanside rental property

[infoseeker]

I am looking to buy a SFH for about 400K with 25% downpayment as a rental property. I am looking for 5% Cash-on-Cash return (after property management fees). Is it realistic? A realtor who I interviewed with today thinks this is possible in Oceanside… I would like to hear your perspective. I am keen on a SFH. Are there any other areas in/around San Diego where this is possible?

[infoseeker]

Just pinging to see if folks have any inputs

[Coronita]

[quote=infoseeker]Just pinging to see if folks have any inputs[/quote]

I think you probably need to do some research and calculate if a particular property(ies) works out for you in terms of your objectives.

No one will know better than your own due dilgence.

If this is your first time: some pointers would be

1. Figure out the cost of the home looking at comparables that sold recently.. If it’s a SFH, figure out how much maintenance you think you’ll need to do based on the specific condition of the home (consider likely repair of big items such as roof, plumbing)…

2. Figure out how much taxes (including any special bond assessments, mello ruse(sic)

3. Figure out how much it will be to insurance the place…

4. Figure out how much your mortgage would be given how much you plan on borrowing and at the rate you will be borrowing at…Add .50% for an investment property to the rate you normally would get for a owner occupied home.

5. Get a good estimate of how much rent you can get…The best way. Use craiglist and either figure out what people are asking for comparables rentals AND how long that rental is staying on craigslist. OR do a fake test post offering rent to see how much interest you get at the price you are advertising…

6. Do the math and figure out how much cash flow you would be generating per month…
Calculate your return on that positive cash flow versus how much money you will be putting in….

If you’re near break even, figure out if you are playing more so with appreciation from this price point on….. Some people don’t mind having $0 cash flow because they figure they are buying in an area with that will appreciate more in the future…
It also depends on your net worth/financial situation. Personally, recent price points, I wouldn’t count on appreciation alone, and wouldn’t want to buy something with a $0 cashflow, with the except of maybe something in Carmel Valley, and even then it would have to be something compelling for me.. But that’s just me.

[HLS]

$400K purchase 25% down
$300K loan @ 4.00% = $1432 payment
+ taxes & insurance = $1900 PITI +/-

You will get your 5% CoC return just from the reduction of principal so any rent that you collect over $1900 +/- should be saved for maintenance & repairs.
(Do you know if you can qualify for financing?)

I wouldn’t expect any appreciation any time soon and there’s a good chance of dropping values and then a flat market for an extended period of time.

You will get an additional tax benefit from depreciation, assuming that you qualify, but this should be a bonus, not a factor.

I’ve been a landlord for over 30 years, it’s not for everyone. I would not suggest a condo as a long term investment.
You should be able to get at least $2250-$2500 a month rent OR it isn’t worth buying.
You can get much better returns in other areas.

[CA renter]

Just want to add that you need to account for vacancies between tenants, and the need for new paint in between tenants, plus the possibility of needing new carpets, etc.

IMHO, it’s best to rent for slightly below market to a really strong tenant who will take good care of the place and stay long-term. Also, rents are often not raised much on these types of tenants, so if you do this, don’t expect rent increases every year. If/when you do raise the rent (perhaps every 2-5 years), expect it to be by small amounts. Otherwise, you might have much higher turnover which will often cost you a fair amount of money.

[infoseeker]

Thanks all for the inputs

[spdrun]

Pergo floors. Always be ready to start advertising the place 2-3 weeks BEFORE the current tenant is due to vacate the premises.

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