When looking to Buy a Rental Home, it almost sounds like common sense to say that you should look for Cash Flow, but Also Future Appreciation. And, it is! But, unfortunately, it’s not what most investors (in our experience) do. Just like most stock investors know to buy low and sell high, but don’t often act that way as emotions and fears often get in the way. What we see most often is that investors/landlords come to us with a strategy and don’t veer from that strategy, even if it may financial sense to do so. For instance, we recently had a new potential client with us and their strategy was to buy urban properties for student population rentals. While that can be a good strategy, we are trying to help that client expand their horizons to other potential VERY lucrative strategies (in addition to their current one) that will maximize their money in both CASH FLOW, but also in future or current appreciation. Not only is this a good idea, but in the current limited inventory (1.7 months of homes available right now) seller’s market environment it may even be a necessity.
Here’s an example of a property that may not jump out at a lot of rental home purchasers, but could do fabulously on cash on cash returns, overall ROI, and price appreciation. Such a home could be the foreclosure house at 5904 Seven Forks Lane in Powhatan.
This 4 bed 2 bath, 1904 sf Powhatan home is currently listed at $85,400 and because its been sitting for a little while could probably be purchased for slightly less. Let’s just use the round number of $80,000 for this example. It probably needs about $10,000 worth of sprucing up for paint, carpet, and landscaping. So, you’d be into the property for $90,000 total. Here we’ll be especially conservative and use $20k in repairs and a total cash outlay of $100,000. The property should rent for about $1400, as determined by our Rent Match Comparison tool (that pulls local comparable rents from many of the property management firms).
With these numbers, you’d have a Cash on Cash Annual Return of 15.46% (after deducting our management fees). Given that this home is currently estimating to sell at a move-in ready figure of $150,000, then you’d also be making $50,000 in equity and that’s with no future appreciation. After holding for one year, the house should be worth $157,500 with a 5% appreciation, providing an ROI of 57.5% and appreciation equity of $57,500. Clearly, this house is an incredible money maker and will always be fairly easy to rent, given the scarcity of available rentals in affluent Powhatan County.
If you’d like to search for your own incredible deals in order to buy a rental home similar to this one, so that you can buy your very own first or next rental home, click here: (https://dave.richmondvahousesforsale.com/)
Or, you call us at 804-307-2589 to discuss further about helping you buy a rental home. And, of course after we’ve helped you to find your next rental home, we’ll be happy to manage it for you to make sure that you capture all of the potential financial gains and minimize your risks with the property. To learn more about our property management services click here: