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Thursday, July 15, 2010
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28 comments:
The light is slowly dawning:
1 delusion down, ? more to go
Ace,
That's quite a sanity check. They still stand to reap $800k (minus transaction costs) if they were to get their asking price.
Anything about this place that says that it's worth more than it's tax assessment to you? I'm not seeing anything from the pictures. And in 2010 it's down another bit to 1.3mil flat. Finishing levels to me actually look like they are under what one would think one could expect for the over 1m market... But at least you don't have to feel guilty about ripping anything out, I guess.
Cara, well, of course without having the house inspected (by you and your pro), it's hard to say but, in a word, no. I agree with you.
I haven't really been watching this price range since it's way out of my league, so I'm just guessing. From the photos, it looks as though not much has been spent on renovations and the house looks outdated, so buyers will need to spend and will discount accordingly. This, and the "as is" language, also suggests that a lot of structural components are probably also wearing out, so discount again. Even with the recent frenzy, I think this one may well go for less than 2010 assessed value.
to me this @ $1.4MM looks better than the one Ace posted.
Hey, MM, that's an even bigger price drop. The yard looks nice. But it still looks as though someone is going to want to come in there and redo the decorating, at the least. You never know with this neighborhood, though. Some people love that style.
MM, ps, I agree, it certainly does look as though the owners have invested more $, in the decorating, the kitchen, and the yard. But that house is much smaller than the first, and Arl. says it (and, to a lesser extent, the land) are worth a lot less. So looks as if they are both pretty considerably overpriced.
Hi all,
I am new here. I am thinking of buying a property to rent in and around the box between Rt50\Rt28\Potomac (sterling, herndon, reston etc). I haven't done this before so I want to start small, some property at or below 150K. Do you think buying houses to rent is a good investment? And what criteria should I use when deciding whether a house will make a good rental investment? Any tips will be appreciated. Finally, what do you think about this house: 221 FILLMORE AVE N #8, Sterling, VA 20164, LO7346557 (how do you add links?). Thanks.
hi friendly,
are you paying cash? mortgage rates are higher for investor-owned properties.
i personally wouldn't borrow money to rent out property but that's just me.
If you are paying cash, and willing to deal with the hassles of section 8 vouchers and tenants then you could probably make a profit each month. What is the going rate for a 3 bedroom voucher? That property is in Sterling Park, right? I wouldn't expect much appreciation (if any) and you are only going to attract low-income/working class, probably immigrant, tenants. So you really want to make sure it cash flows today, kwim?
Beyond that specific property, if I had to choose a property to invest in within the area you named, I would look for a small townhouse in Reston, in a decent elementary district, near (but not too close) to where they are putting in the Wiehle ave metro.
freindly-
Hopefully VA_investor can answer some of your questions, because she owns a lot of properties and I think she is familiar with that area. She has clearly shown a lot of money can be made if you buy the right properties at the right time and manage them well.
In general I think the most important thing is to make sure that the property is cash flow positive. This way the property will slowly pay down its mortgage and hopefully appreciate over time. To do this you need to figure out what all of your costs will be (e.g. mortgage payments, taxes, HOA/condo fees, repairs between tenants like new carpet and paint). These costs need to be lower than the income you will take in from rent (remember that you likely will not be able to rent the property 100% of the time, because it may take a month or two between different tenants).
In addition to wanting to start small I think it is a good idea to start with an inexpensive house because the ratio of rental incomes vs. mortgage payments tends to be much higher for inexpensive houses rather than expensive houses. Finally as a warning you need to make sure you are up for doing the leg work. It can be a lot of work finding a tenant and making sure you get paid every month, and this is essential or you will lose money on your investments.
Meshell,
Why would you not finance a rental property? Sterling Park probably produces good cash flow. Not all people there are section 8, and some section 8 are actually great tenants.
There is a trade-off between cash-flow and appreciation, historically.
As far as paying cash? I'd rather have as much leverage as possible and have the tenants buy the properties for me. Rates are higher for rentals, but today's rates are terrific.
Of course I'm thinking 10 or 20yrs out, not the monthly yoy noise. I have a large group of people currently buying properties for me.
friendly,
The tiny bit to add to what hb and Va_investor are saying is this:
The best online resource I found _quickly_ for evaluating whether rental property is a good investment is:
www.rentalsonline.com
It's pretty thin on details, but does illustrate the kind of thought process you'd go through and why financing increases your return on investment. (Of course leverage does that to all investments, increasing both the reward and the risk).
I just hate borrowing money, so its not for me. It isn't a rational objection ;).
I don't think everyone living in Sterling Park is paying with section 8 vouchers, but if I owned a rental there I would be looking into getting paid with them vs just being a regular rental. Its guaranteed money if you don't mind the administrative hassle, right?
Thank you all for great comments.
Meshell: thanks for the info on section 8.
Cara: great link
VA investor: "trade off" argument makes sense. How much would you offer for the property i posted?
Lastly, is it better to rent as an individual or thru an LLC, tax-wise? Thanks.
friendly,
One thing, maybe this isn't a worry, but I would make sure the condo association allows landlords, before buying. By VA standards the contract has to include a clause about reviewing the condo docs for 3? days during which you're allowed to break the contract without cause if you see anything you don't like.
Basically, if the rents I could find on Craig's list can be used as a guide (questionable) then at 100k that thing is so cash-flow positive it's crazy (even after the $245 monthly condo fee). I.e. it's confusing why no one else has bought it yet. So I'm wondering if the catch is that the condo association doesn't allow more than X percent of the units to be rented out at any given time, and they are already up against that limit.
If you can find this out before putting in a bid great, but if not make sure you have "get out of contract free" cards on hand if it turns out you won't be able to rent it.
hmm... the latest price drop makes this house interesting...
a house with kitchen this new is "value mostly in the land"? this is how messed up N Arl market is.
also, ...cuttently (currently?) lived in by mom (and?) 7 son (s?)... wow!
MM,
I read it as,
...cuttently (currently) lived in by mom 7 (&) son
'7' and '&' share the same keyboard key. 7 sons would be crazy!
friendly,
I'd have to see the property before saying what I would offer. Rents would probably be $1,200 -1,400 per month. Check the reserves for the hoa. Some out that way are awful and will need some big assessments.
I'd take the short at Providence Village (115K) before I'd take Pembrooke.
LLC offers no tax advantages; only liability (which can easily be handled by an umbrella).
lol, mm, maybe the 7 dwarves?
Weird, b/c the kitchen and living room pictures look nice, but no other pictures. I can't imagine the rest of the house looks too bad, if the kitchen is so presentable?
I love the architectural style of this house. I just wish it was a little bigger...where would we put all our stuff?
http://franklymls.com/FX7372736
Outtamyway, Meshell! I'm going to bid $1 million for that place!
I know there has been talk about the FHA changing its underwritting standards, but it looks like it is finally going to happen.
Nothing super exciting, but at least a small step towards beter underwritting...
fha
http://franklymls.com/DC7334262
under drinking the koolaid this guy buys this place 2 years ago for 375, thinks he can sell now for 450K
and it won't meet VA/FHA
Pat-
I love when people comment that it will not meet FHA/VA financing. To me that just sounds like saying this house will not appraise for what I am selling it for...
Pat,
Not qualifying for FHA financing has nothing to do with the relative value of a property. FHA has some pretty tight (and some pretty petty) requirements for the condition of specific aspects of a home.
HB, that's one factor. Another is that traditionally FHA had very strict property condition standards. I think the reasoning behind this was that FHA is loaning money to people who do not have a big down payment and fall under certain loan limits, and so they don't have a lot of extra money socked away for major repairs. So the property needed to be in good shape at least until the buyers would have enough time to save for an emergency fund.
This property is listed as needing work.
These standards used to be so strict that if you had a cracked basement window, FHA required it to be fixed before the property could be sold, for example. I haven't kept up so I don't know whether that's still true. I think the 203 program was set up to deal with fixer properties but I don't know much about it or why this seller isn't saying his/her property could qualify for it.
some Apartments for Rent in Indianapolis: site
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