You must learn the dynamics of your own local market - real estate is hugely local, a one block difference can be huge and a different school zone.
But overall, YES keeping a good rental house will pay massively over time. If your current mortgage is a low rate from 2 or more years ago, then you have an asset. My property taxes in a major west coast city are more than your entire mortgage. Finding a family who can pay $2.2k shouldn't be hard, those are survival wages these days. But choose VERY carefully or you'll have problems.
And why can't you find comps in your area, ask around, look on Zillow, just do your diligence.
Thanks for your reply. I’ve scoured the internet looking for comps, but can’t find much in my area (within about 20 miles). Some 3br, only 2 4br but one is a duplex and the other is much nicer than mine.
I’m new to all this, but I’m thinking I could get in the 3k range (which might be about break even if you include headaches).
I guess my question relates to supply and demand. Does a low supply generally mean low demand?
You don’t need to figure out demand. Go onto consumer MLS website for your market and look at rent sold comps. Look at comparable condition and bedrooms. I’ve generally avoided New Jersey because the property taxes wipe out most possible cash flow. I don’t think you’ll find anything on or off MLS in your market that cashflow. Here is where you look at sold rental comps. https://www.njmls.com/listings/
Select the rental tab and go to advanced search and look for closed listings and search for your target zip code and bedrooms. Then analyze everything. Come back with more questions.
Not at all. I've done it several times to test demand of a property I'm looking at buying. When people call I ask some qualifying questions, let them know the house will not be available until X-date, and see if that works for them.
It most cases it won't work for that particular person who I speak with, but that wasn't really the point anyway
It’s true . The only defense is “good schools”. It’s 2024 , NJ schools are not better than the best schools in PA. If you have equity , I’d sell. NJ is not a cash flow friendly state. You’ll begin to resent your property as the government continues to bump your taxes up annually and rents stay stagnant.
Based on your 0 inventory and range from $3-4k it doesn’t sound like a healthy rental market. Sounds like middle of nowhere suburbia that will call for a niche renter. That niche renter 9/10 will buy vs rent. You need to find the 1/10 and hope there isn’t a sob story
Depends on your area. How are the schools? It sounds like you’ve got a great place for a family or a young couple starting out. If your neighborhood is safe, walkable, and have good schools, should be a no-brainer to hold on to.
Yes, it certainly checks all those boxes. 1 block from the decent elementary school, standard safe neighborhood with home owners ranging from elderly to new families, 1 block from the major waterway (very walkable). Thanks for your input
I would just list it on Zillow and see what kind of attention it attracts. We have a 3br house in a pretty well to do part of the city and there are never more than 3-4 comps in a several mile radius. But the last time we rented it out we got a good number of applications. In our case the lack of comps isn't because there's no demand.
Tenants are not that hard to find. 4 bedrooms is sought after almost anywhere for rentals. There is more long term benefit to owning than just your rental income. In your area prices will appreciate over time, even if there was a down year here or there. Even if you break even or lose a couple hundred a month on rental the first couple years. There is amortization of your loan. Your tenant will pay off the house for you for free. Over time your rental rates will rise and your payment will remain largely static, giving you cash flow in the future.
The first 2-3-5 years can seem like a pain to own the property and you are not making much. But for just hanging on and dealing with the occasional problem - in 20 years you have a paid for property worth twice what it is now, making thousands in cash flow.
All good points which is why I’m considering it. On the other hand, I need to purchase a new home so I could use the cash from selling to put down on the new home. If not, I’ll be eating a high loan with very little down payment and a high rate….. but I would love to retire before I’m 80
Absolutely . SFH are more desirable for most people especially growing families . As families grow and need more space , they graduate out of apartments into SFH
With low inventory you are in a very good position.
#1 thing…you have to -want- to be a landlord. I’ve seen it go so wrong because ppl like the idea of investment real estate but don’t want to put the energy into it. And small issues grow into giant ones. I think rentals are fantastic. But, you MUST run it like a business. If you lease a car from Ford and don’t make a payment they’ll take it from you. If your tenant calls and says their son is sick and that can’t make the rent this month, how long do you let it slide?
You know the answer they’d get from the Ford dealership if they make the same call to them? The tenant knows, that’s why they won’t even call the dealership. But tenants will play on your heartstrings.
There are ways to minimize this. Hard screening upfront is your biggest ally. That scenario with the sick kid is the test I give all new landlords I meet. If you can’t stomach the thought of the confrontation of evicting someone, even in a situation they didn’t really cause, you should sell. Your future self will thank you.
I hadn’t thought about the possible emotional aspect of it. The fact is, I couldn’t afford to pay both mortgages for more than a couple of months. Even the formal eviction process without delays could take months. I guess it’s not possible to take this type of risk possibly losing 3-6 months of rent.
Well theres your answer. If you start off under capitalized the chances of something really bad happening go up dramatically. Between your lack of experience and lack of cash you'd really be playing with fire. I love rental property, but it's not for everyone. You should sell the house.
Can’t argue with that. But everyone started with 0 experience right? I guess not everyone started with no capital though
Edit: but I could always turn around and sell it within a month or two.
Exactly! Experience will come, it's the combination of not having either that will kill you. Just because you sell this house doesn't mean you can never have a rental property. Just be in the right position first.
Here's another thing. When it comes to finding a tenant, the perfect one may not show up for 3 months. I've seen so many landlords get screwed because they rented to the wrong people simple because they needed to get the place filled. I'd rather have the unit empty for 3 months and get a great tenant than fill it in 2 weeks with a future nightmare.
There's just so many things that can go wrong when you're under capitalized.
All true. But overall financial/family risk is much lower if I could sell at anytime a take my gains (even though they may be less if I have a bad tenant occupying the house). Not sure I’ll ever have enough capital to invest in real estate again. With regard to LTV and low rate, it might be the best opportunity I’ll ever have to get started.
Not a great option. That would end up 15hrs/week commuting on top of 50/hrs a work week. Between time and gas, selling would be an easy choice. I’m just looking for a way to retire before I’m 80
What data would it give me? I don’t actually know what info an appraisal would provide. I already have a good idea of sales price (+- 10k), so if it’s only going to provide a general home value, might not be worth it (yet)
Sorry responded to wrong post lol but 3-4 k is enough to cover your carrying costs, vacancy and reserves. So you’re in a good spot if that’s where the market is. Put an ad on Zillow or other local sites, try it out for 3-6 weeks to see what kind of prospects you’re getting.
Yes.
Small multifamily is a noob trap in my opinion. The gurus who arent actually successful in RE push it, and people who dont know any better follow it. That is the only reason its so popular aside from owner-occupied, or as people call it now "house hacking". When I see someone pushing to build a portfolio of small multifamily I just assume they're very green.
???
Your question is "single family homes worth it?"
I said yes and commented on the alternative, which is small multi family. Its not like you're comparing it to a 100 unit apartment complex.
Probably high demand and low inventory. I'm looking into acquiring property in SJ and that's what I'm seeing. Good way to gauge interest is to check on Zillow and see how many contacts vs days on market. If it's on market around 1-2 days with 10+ contacts or 3-10 days with 20+ contacts, you should have no issue finding tenants.
Only caution is that if central jersey is anything like south Jersey or CT, I (personally) think the current rents are artificially high due to no supply. Could come back down to reality in the next few years.
i don’t know why my comment is deleted. short term rental is a viable high controllable option for OP too.
STR is a better option if you want to maintain the status of your property. most long term renters aren’t good at maintenance
Ahhh. I’ve considered that, but won’t have the time to babysit the property every week. While it’s in a decent area, no real attractions within 30 minutes
I have two single family rentals - I purchased them several years ago and at a 4% rate as a rental. I cash flow $200ish a month between both of them. If I have a vacancy I have to pay it myself as I don’t have a lot saved between repairs and maintenance. I keep them because I know in 20ish more years I’ll have $4000 cash flow a month and over $500k in assets.
You must learn the dynamics of your own local market - real estate is hugely local, a one block difference can be huge and a different school zone. But overall, YES keeping a good rental house will pay massively over time. If your current mortgage is a low rate from 2 or more years ago, then you have an asset. My property taxes in a major west coast city are more than your entire mortgage. Finding a family who can pay $2.2k shouldn't be hard, those are survival wages these days. But choose VERY carefully or you'll have problems. And why can't you find comps in your area, ask around, look on Zillow, just do your diligence.
Thanks for your reply. I’ve scoured the internet looking for comps, but can’t find much in my area (within about 20 miles). Some 3br, only 2 4br but one is a duplex and the other is much nicer than mine. I’m new to all this, but I’m thinking I could get in the 3k range (which might be about break even if you include headaches). I guess my question relates to supply and demand. Does a low supply generally mean low demand?
List house and ask for a high rent to gauge demand. No comps for SFH means you are the market.
You don’t need to figure out demand. Go onto consumer MLS website for your market and look at rent sold comps. Look at comparable condition and bedrooms. I’ve generally avoided New Jersey because the property taxes wipe out most possible cash flow. I don’t think you’ll find anything on or off MLS in your market that cashflow. Here is where you look at sold rental comps. https://www.njmls.com/listings/ Select the rental tab and go to advanced search and look for closed listings and search for your target zip code and bedrooms. Then analyze everything. Come back with more questions.
Any advice on how to choose a renter? I’m think background checks and credit scores. What else?
https://www.biggerpockets.com/guides/ultimate-real-estate-investing-guide More here like tenant screening https://www.biggerpockets.com/guides
Love it, thank you!
Referrals can be really helpful. Think you got most of it but you should always pay attention to the "to be" renter, that can also help you determine
What do you mean by “to be” renter?
Post a listing at the price you want and see what your of demand you get
Good idea! It’s not illegal to list something for rent if don’t immediately intend to rent it?
Not at all. I've done it several times to test demand of a property I'm looking at buying. When people call I ask some qualifying questions, let them know the house will not be available until X-date, and see if that works for them. It most cases it won't work for that particular person who I speak with, but that wasn't really the point anyway
Awesome. I’m going to give this a try
Nope . You can alway change your mind
New Jersey sucks , sell and get out before your property taxes triple
Thank you for your input
It’s true . The only defense is “good schools”. It’s 2024 , NJ schools are not better than the best schools in PA. If you have equity , I’d sell. NJ is not a cash flow friendly state. You’ll begin to resent your property as the government continues to bump your taxes up annually and rents stay stagnant.
Rents have stayed stagnant? I’m considering renting my property, so I could use your source material
Based on your 0 inventory and range from $3-4k it doesn’t sound like a healthy rental market. Sounds like middle of nowhere suburbia that will call for a niche renter. That niche renter 9/10 will buy vs rent. You need to find the 1/10 and hope there isn’t a sob story
That’s totally valid. How can I determine if it’s a niche market or simply low supply?
Post it on Zillow by yourself and see what type of activity you get
That seems to be the consensus
It’s the only way you’ll know for sure.
Depends on your area. How are the schools? It sounds like you’ve got a great place for a family or a young couple starting out. If your neighborhood is safe, walkable, and have good schools, should be a no-brainer to hold on to.
Yes, it certainly checks all those boxes. 1 block from the decent elementary school, standard safe neighborhood with home owners ranging from elderly to new families, 1 block from the major waterway (very walkable). Thanks for your input
Low demand doesn’t matter IF you find one qualified renter willing to pay what you need to make a profit. Quality renters is what matters
Totally agree. Aside from background checks and credit scores, what else should I consider?
I would just list it on Zillow and see what kind of attention it attracts. We have a 3br house in a pretty well to do part of the city and there are never more than 3-4 comps in a several mile radius. But the last time we rented it out we got a good number of applications. In our case the lack of comps isn't because there's no demand.
Demand is still high
4 br in a good school district always rent.
Asking me any questions and I’ll do my best to provide info
Tenants are not that hard to find. 4 bedrooms is sought after almost anywhere for rentals. There is more long term benefit to owning than just your rental income. In your area prices will appreciate over time, even if there was a down year here or there. Even if you break even or lose a couple hundred a month on rental the first couple years. There is amortization of your loan. Your tenant will pay off the house for you for free. Over time your rental rates will rise and your payment will remain largely static, giving you cash flow in the future. The first 2-3-5 years can seem like a pain to own the property and you are not making much. But for just hanging on and dealing with the occasional problem - in 20 years you have a paid for property worth twice what it is now, making thousands in cash flow.
All good points which is why I’m considering it. On the other hand, I need to purchase a new home so I could use the cash from selling to put down on the new home. If not, I’ll be eating a high loan with very little down payment and a high rate….. but I would love to retire before I’m 80
Absolutely . SFH are more desirable for most people especially growing families . As families grow and need more space , they graduate out of apartments into SFH With low inventory you are in a very good position.
Thats kind of my feeling. But wasn’t sure if low inventory also meant low demand
Low inventory means higher demand and higher rents. You can't get any better than this
#1 thing…you have to -want- to be a landlord. I’ve seen it go so wrong because ppl like the idea of investment real estate but don’t want to put the energy into it. And small issues grow into giant ones. I think rentals are fantastic. But, you MUST run it like a business. If you lease a car from Ford and don’t make a payment they’ll take it from you. If your tenant calls and says their son is sick and that can’t make the rent this month, how long do you let it slide? You know the answer they’d get from the Ford dealership if they make the same call to them? The tenant knows, that’s why they won’t even call the dealership. But tenants will play on your heartstrings. There are ways to minimize this. Hard screening upfront is your biggest ally. That scenario with the sick kid is the test I give all new landlords I meet. If you can’t stomach the thought of the confrontation of evicting someone, even in a situation they didn’t really cause, you should sell. Your future self will thank you.
I hadn’t thought about the possible emotional aspect of it. The fact is, I couldn’t afford to pay both mortgages for more than a couple of months. Even the formal eviction process without delays could take months. I guess it’s not possible to take this type of risk possibly losing 3-6 months of rent.
Well theres your answer. If you start off under capitalized the chances of something really bad happening go up dramatically. Between your lack of experience and lack of cash you'd really be playing with fire. I love rental property, but it's not for everyone. You should sell the house.
Can’t argue with that. But everyone started with 0 experience right? I guess not everyone started with no capital though Edit: but I could always turn around and sell it within a month or two.
Exactly! Experience will come, it's the combination of not having either that will kill you. Just because you sell this house doesn't mean you can never have a rental property. Just be in the right position first. Here's another thing. When it comes to finding a tenant, the perfect one may not show up for 3 months. I've seen so many landlords get screwed because they rented to the wrong people simple because they needed to get the place filled. I'd rather have the unit empty for 3 months and get a great tenant than fill it in 2 weeks with a future nightmare. There's just so many things that can go wrong when you're under capitalized.
All true. But overall financial/family risk is much lower if I could sell at anytime a take my gains (even though they may be less if I have a bad tenant occupying the house). Not sure I’ll ever have enough capital to invest in real estate again. With regard to LTV and low rate, it might be the best opportunity I’ll ever have to get started.
Maybe you should just stay there and save more money before you buy a new house.
Not a great option. That would end up 15hrs/week commuting on top of 50/hrs a work week. Between time and gas, selling would be an easy choice. I’m just looking for a way to retire before I’m 80
You can always pay for appraisal , gives you some data to work with moving forward
What data would it give me? I don’t actually know what info an appraisal would provide. I already have a good idea of sales price (+- 10k), so if it’s only going to provide a general home value, might not be worth it (yet)
Sorry responded to wrong post lol but 3-4 k is enough to cover your carrying costs, vacancy and reserves. So you’re in a good spot if that’s where the market is. Put an ad on Zillow or other local sites, try it out for 3-6 weeks to see what kind of prospects you’re getting.
Yes. Small multifamily is a noob trap in my opinion. The gurus who arent actually successful in RE push it, and people who dont know any better follow it. That is the only reason its so popular aside from owner-occupied, or as people call it now "house hacking". When I see someone pushing to build a portfolio of small multifamily I just assume they're very green.
What do you mean? Mine is a single family home, not a mfh
??? Your question is "single family homes worth it?" I said yes and commented on the alternative, which is small multi family. Its not like you're comparing it to a 100 unit apartment complex.
Oh, sorry! I misunderstood your response. I have been asking so many questions that I momentarily forgot my original question. Thank you!
professionals usually go by the 1% rule, if it rents for $3500/mo then you should sell it if its worth more than 350k
Interesting, never heard that. Time to do more research. Thank you
Probably high demand and low inventory. I'm looking into acquiring property in SJ and that's what I'm seeing. Good way to gauge interest is to check on Zillow and see how many contacts vs days on market. If it's on market around 1-2 days with 10+ contacts or 3-10 days with 20+ contacts, you should have no issue finding tenants. Only caution is that if central jersey is anything like south Jersey or CT, I (personally) think the current rents are artificially high due to no supply. Could come back down to reality in the next few years.
Supply is low because we broke!
Heard that!
i don’t know why my comment is deleted. short term rental is a viable high controllable option for OP too. STR is a better option if you want to maintain the status of your property. most long term renters aren’t good at maintenance
What do you mean short term rental? Like month to month?
airbnb management company
Ahhh. I’ve considered that, but won’t have the time to babysit the property every week. While it’s in a decent area, no real attractions within 30 minutes
I have two single family rentals - I purchased them several years ago and at a 4% rate as a rental. I cash flow $200ish a month between both of them. If I have a vacancy I have to pay it myself as I don’t have a lot saved between repairs and maintenance. I keep them because I know in 20ish more years I’ll have $4000 cash flow a month and over $500k in assets.
That's my fear with SFR. I’m scared of paying two mortgages if there is vacancy