Real Estate Market. Thoughts?

[CS1983]

If the house was new 3 years ago and the owner bought it then, the price was probably very cheap back then.

I don't think anything in this neighborhood sold below 200k, but I could be wrong.

I've rented out most of my places before I sold them as I was PCSing. The standard property management fee was 10% of the gross rent although I've gotten as low as 7%. Of course, the realty could make more if they buy the property themselves specifically as rentals but they also have to put a lot more money down on a business loan and that ties up capital. I put over 20% down so I could get the best rates when I bought it 12 year ago; I think PITI (Principal, Interest, Taxes, Insurance) for my house are just under $1400 now. Taxes and Insurance have risen by $100 or so in the past 10 years.

So they make the money on quantity compounding otherwise low per-property profit?

[Firehaus]

Management can cost 3%-10% of gross property income depending on size of rental. Late fees, notice fees, laundry income, etc gets calculated in with the rents.

The Springs is considerably lower than Denver metro rent wise. Denver rent should be going to around 4-6% annual increase soon.


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[Wulf202]

House across the street is for sale at 240k, fairly large back yard. Google mortgage calc says 1135/mo for that.

That is probably low by 100/mo

[Aloha_Shooter]

House across the street is for sale at 240k, fairly large back yard. Google mortgage calc says 1135/mo for that.

That's probably just the principal and interest. The owner is also going to have to pay taxes and insurance on the property. That's going to be at least $100/mo (in line with what Wulf202 said), probably quite a bit more.

So they make the money on quantity compounding otherwise low per-property profit?

Property management is a low-profit per hour activity for realtors. I found a lot of realtors don't even offer it as a service, others will take it on in order to generate customer leads. The best property manager I ever had did it as his main business and had huge volume. He had all the steps streamlined and had enough pull with repairmen (due to volume) that he could get stuff done fast and cheap (and right). He also kept a realtor license so he could offer to work deals when the renter decided they liked it so much they wanted to buy the property. The worst property manager I had was a full-time realtor who did property management for some steady cash flow. I would have fired her if it wouldn't have been a major pain in the ass to find a replacement from Korea.

You're crazy or getting side benefits if you're paying over 10% for property management. Assuming the owners of your property are paying 10%, they're pocketing $1345/mo before expenses. That $1345 has to cover the mortgage (taxes & insurance as well as principal and interest), repairs, regular maintenance, etc. I don't know where you're living but assuming the properties in your area are going for over $200K (true of almost anything available in the Springs now), I would bet the owners are making at best $100/mo and more than likely losing $50-100/mo in cash flow. The good news for them is that the tax write-off makes even a $100/mo loss palatable in the long run.

There are actual real estate professionals in the forum (or closer to it than me) and I got out of all my rental properties before the crash (because I saw it coming) so take anything I say with a 5 lb bag of salt ...

[Firehaus]

I'm not a fan of single family rentals, but I've had good luck with multifamily.


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[CS1983]

That's probably just the principal and interest. The owner is also going to have to pay taxes and insurance on the property. That's going to be at least $100/mo (in line with what Wulf202 said), probably quite a bit more.



Property management is a low-profit per hour activity for realtors. I found a lot of realtors don't even offer it as a service, others will take it on in order to generate customer leads. The best property manager I ever had did it as his main business and had huge volume. He had all the steps streamlined and had enough pull with repairmen (due to volume) that he could get stuff done fast and cheap (and right). He also kept a realtor license so he could offer to work deals when the renter decided they liked it so much they wanted to buy the property. The worst property manager I had was a full-time realtor who did property management for some steady cash flow. I would have fired her if it wouldn't have been a major pain in the ass to find a replacement from Korea.

You're crazy or getting side benefits if you're paying over 10% for property management. Assuming the owners of your property are paying 10%, they're pocketing $1345/mo before expenses. That $1345 has to cover the mortgage (taxes & insurance as well as principal and interest), repairs, regular maintenance, etc. I don't know where you're living but assuming the properties in your area are going for over $200K (true of almost anything available in the Springs now), I would bet the owners are making at best $100/mo and more than likely losing $50-100/mo in cash flow. The good news for them is that the tax write-off makes even a $100/mo loss palatable in the long run.

There are actual real estate professionals in the forum (or closer to it than me) and I got out of all my rental properties before the crash (because I saw it coming) so take anything I say with a 5 lb bag of salt ...

I'm actually thinking about trying to buy this place so maybe if it sucks that bad to be an owner who rents it out, I could. If we upgrade, I'd sell or rent to a family we know.

I always assumed owners made more money than that.

[Wulf202]

Aloha is running the numbers as a home buyer. For rentals you need 20% down so that'd lower the payment plus they obviously owned it before cav rented it. So at a minimum they'd have paid 10% less last year. With rough math that puts their mortgage at 950 max. Clearing a min of 400 a month with a max of 43k into it. Better than 10% return on their cash plus the free equity 2x

I have both single family and multi along with a day job in real estate. I prefer multi family for long term rentals and single family for flip or medium hold. I may start doing new builds this or next year.

[Firehaus]

tals and single family for flip or medium hold. I may start doing new builds this or next year.

Hopefully new single family and not new build multifamily.



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[Wulf202]

Hopefully new single family and not new build multifamily.



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Eventually I'll build myself some 2-4 plex properties for retirement accounts. At this point I'm trying to figure out how much past the age of 40 I want to work.

[CS1983]

Aloha is running the numbers as a home buyer. For rentals you need 20% down so that'd lower the payment plus they obviously owned it before cav rented it. So at a minimum they'd have paid 10% less last year. With rough math that puts their mortgage at 950 max. Clearing a min of 400 a month with a max of 43k into it. Better than 10% return on their cash plus the free equity 2x

I have both single family and multi along with a day job in real estate. I prefer multi family for long term rentals and single family for flip or medium hold. I may start doing new builds this or next year.

Best I can tell, they bought it new and rented it to some soldier and his wife right away. He left and they rented it to another family. They left and we got into it. 2nd family had no pets and the 1st family did based on the original pics, which is probably why the upstairs non-main bedroom closets smelled like cat piss and there was a vehement, emphatic, no tolerance "no pets" policy. House was first sold in 2013.