Are these good numbers for single family home rental portfolio?

[TangoWhiskey]

We just learned about a bank foreclosed semi-detached 6 yr old property right beside two other foreclosures we bought to try the RTO strategy with (exact same houses built by the same builder who went bankrupt). These are in a rapidly growing but very overlooked part of the Halifax sub-market. All 3 back onto a nature conservation area and are 1 block from a brand new junior high school.



Purchase price 170K; 172K; and 176K.

1250 sq ft in two finished floors with unfinished basement

Open concept 3 bed 3 bath, master has an ensuite

Proven rent is 1200/month plus utilities (exact same houses on same street being used as rentals)

Mortgage payment is 800 $/month incl taxes; plus insurance 80 $

Tenant pays water and everything else

With 120$/month to cover long term maintenance, this should cashflow about 100-200$/month



This seems very rare on myreinspace - cashflow positive single family homes.



Am I missing anything? The due diligence I've done on this market to establish rent levels is extensive. Have I found a pocket of opportunity here?



My analyis has been to look at the cash in - about 50-55 K all told per house with a paint job - and look at cash out. With an RTO strategy adding 200-300 /month for the rental credit on top of the 200 $/month cashflow these should be 10 % cash on cash investments (5000 per yr cashflow/50 000 invested).



Any thoughts or opinions are appreciated. As a by mail member, my only contact with other REIN investors is through myreinspace. Your responses/experience are really valuable.

 

[housingrental]

Every person has a different idea of what a good ROI is.

Ensure you understand and are comfortable with the risks (specifically for this type of product in many markets there can be limited demand for a $1200 per month rental - so there might be extended periods of vacancy while holding out for the right tenant)

If it works for you go for it.

 

[Thomas Beyer]

Why RTO, a difficult strategy to implement ? Why not buy and hold, perhaps refi in 3 years with those numbers ? Or sell when sub-division is more established for a higher value lift ? Patience, young man, patience.

 

[invst4profit]

My opinion. As a long term hold on those single family homes you will likely have negative cash flow at about $200 per month. If interest rates rise it will be greater. The reason being is that single family homes generally have expenses in the 50% of income range but because they are all new you will not actually realise this until repairs begin down the road.

You would be wise to take the money and run. By that I mean unload them before the expenses begin at about the 10 year mark.

Be careful when doing the due diligence on these homes. If the builder went bankrupt most likely they were shoddily build using low quality materials and workmanship. This will add to your expenses down the road.

RTO is probably your best option to unload them as quickly as possible making your profit up front.

 

[TangoWhiskey]

Some great answers from the heavy hitters.



My thinking is:



I am buying these to get my wife into RE investing (it seems to have worked too!)

With RTO the SFH can meet my 10 % cash on cash goal

With an RTO strategy her mgmt issues are hopefully only two things: 1) buying 2) holding until she finds those 3 tenants to do an ethical RTO with.

These are great assets to complement larger multi family assets for raising capital

They are a good store of value and much more liquid than the multi family I focus on

RTO avoids the high transaction costs in RE that can eat so much of the return on a short hold



Thanks again to all and any additional comments are appreciated.

 

[Thomas Beyer]

[quote user=TangoWhiskey]With RTO the SFH can meet my 10 % cash on cash goal

With an RTO strategy her mgmt issues are hopefully only two things: 1) buying 2) holding until she finds those 3 tenants to do an ethical RTO with.

These are great assets to complement larger multi family assets for raising capital

They are a good store of value and much more liquid than the multi family I focus on

RTO avoids the high transaction costs in RE that can eat so much of the return on a short hold


a wise young man !