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Topic: General Information

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Posted By: Guest

Subject: Does anyone own a rental property and make money

I'm just wondering if anyone out there owns a rental property and how well they are doing with their investment. Thanks

Message Replies:

57606: RE: Does anyone own a rental property and make mon

10/31/2009 2:51:46 PM

Posted By: Guest

very few places will make u money. usually u have to pay down a big chunk to even have a chance. and if you are not along the oceanfront there is too many simular houses to be able to drive your rent high enough to make the numbers work. But if you get a place that drives strong, long rentals (into the shoulder season) and you put at least 20% down and get a good interest rate, you can come close to cashflowing on some places and get some great tax benefits that does make it a decent (not great) investment. Remember, you also get to enjoy a place at the beach....that's worth something, too. You can't vacation in your stock portfolio.

57609: RE: Does anyone own a rental property and make mon

10/31/2009 4:59:34 PM

Posted By: fyrefighter273

I now have two, am I making money? Depends on how one defines making money. I am blessed to live here so I actually do all of my repairs/upkeep, my wife cleans, arranges rental, does website. You get a lot of tax breaks which helps a lot. We are lucky since we have made enough to cover our biggest expense that I cannot fix (HVAC) other than that we break even, we did pay 20% down on both houses, keep in mind these houses were something like you see on the show Flip This House. We are lucky that our home is paid for, I work 3 jobs and my wife works full time as well as our rentals. Down side is you never realize how big your family is till you get a rental, some folks don't care about your rental or the contract, the deposit does not always cover damages. We are very lucky in other ways as well since our renters are typically family oriented and have a lot of repeat business. Think long and hard about it before you invest, you can't vacation in your portfolio that is true but you cant live on the revenue on a rental.

57613: RE: Does anyone own a rental property and make mon

10/31/2009 10:20:49 PM

Posted By: Guest

My parents have an OF in KH they make money on. They have owned it for 10 years and were in the black just after their first year of ownership. I remember the first year was pretty stressful for them though.

57620: RE: Does anyone own a rental property and make mon

11/1/2009 7:17:38 AM

Posted By: Guest

I have a year around rental and I don't make money on it, but the rent does pay the mortgage comes close to paying the taxes, but repairs and insurance are out of pocket. We debated selling it about 5 years ago but decided to hold it as long as possible, it will be great when it is paid off.

57621: RE: Does anyone own a rental property and make mon

11/1/2009 8:03:47 AM

Posted By: Guest

Being in real estate here I hear this question a lot. If you are asking does the rental generate enough to make it cash positive, then the easy answer is no. If you could put down 20% (the min today) and make enough to make a positive cash flow then I can assure you I would own 100 of them! Maybe 200 and I would not sell real estate, just buy more.

So you ask, why do people buy them?

Now is a perfect time to buy one, prices are down and the interest rate on loans is ridiculously low. You have to plan on holding it for 5+ years and then decide if you want to sell at a profit or hold it for some more time. The market will come back and it has already started to this fall as buyer investors are coming back into the market. I have been showing homes all month and my listings are getting shown and offers are coming in, some even get accepted. Most of the foreclosed homes the bank owns sell because the prices are good, but most of these are not vacation rental homes but primary residences of people who could not make the payment. Most were purchased in 2005 or 2006.

Rental homes will make enough to pay the PI (principal and interest) but you will be out-of-pocket the rest. This can be $8000 to 20,000 depending on how big the house is, does it have a pool, does it need updating, does the rental company do a good job renting it and does the owner allow it to be rented more than just June to Sept. When you add in the fact that you can come and use the house in the pre and post seasons and you figure in the many tax deductions then you come close to break-even even though you are out-of-pocket each year by some amount. Hang on to the house, take care of it and sell it in 5-10 years for a nice profit, this is what the savy investor is doing and it works. If it didn't no one would own all these homes. Many in 2005-2006 paid way too much and they are going to loose money if they sell now so most are waiting. I went through that same scenareo back in the early 90's when I bought near the peak. Today my house is easily worth 2.5 times what I paid and was worth 3-4 times what I paid in 2006 at the peak. It is making enough in rental income now to help pay the mortgage on another home I have. The system works!

57624: RE: Does anyone own a rental property and make mon

11/1/2009 9:17:18 AM

Posted By: Guest

I dont own any homes there, but a family member does. The key to "profits" is location. Closer to the ocean, the better. Even gorgeous homes a few blocks back do not make what an old style oceanfront, or semi-oceanfront cottage does. People come to be near the beach, passing up lots of amenitites to do so.

57625: RE: Does anyone own a rental property and make mon

11/1/2009 10:07:34 AM

Posted By: Guest

624,

I can tell you that what you are saying is somewhat correct, but they still don't make a profit. Oceanfront homes make more in rental income than a "beachbox" 7 lots back, this is true, but the cost to purchase both are like night and day! An oceanfront, today, will cost over $900,000 just because the lot is going to start at about that price. Yes - I know there are those tiny oceanfront homes in Kitty Hawk that are in the $350,000 to $450,000 range but they are cheap because they can not be rebuilt if damaged and the insureance won't pay for the loss either so they are HUGE risks to buy and why you don't see many fools buying them. There are 1-2 sold each year but they are big risk takers and if damaged 51% or more they are gone forever.
A million dollar oceanfront with a pool will bring in $50,000-80,000 each year. Pay the 14-15% commission to a rental company, pay $120 each week for pool and ho tub service pay $5000 in property tax each year and add utilities and maintenance and you will see even they are not cash positive.

Nope - they all loose money no mater where they are if you put down 20 or 30%. Put down 50-60% and they might be a positive but not at 20%.

57627: RE: Does anyone own a rental property and make mon

11/1/2009 12:40:13 PM

Posted By: The REAL Jen

There are OF houses way cheaper than 350k in KH.

57628: RE: Does anyone own a rental property and make mon

11/1/2009 12:57:09 PM

Posted By: Guest

I was just ball parking numbers. There is one listed for sale at $215k and one at $295k and one at $329k. I would not say they were way cheaper, they are huge risks since they only generate $14k to 25K but it is almost a 8% ROI. Still very risky since flood insurance might pay $50-70k on your $215-329k investment.

Some have been on the market for over a year and I know one that has been listed for 2+ years with different companies (I had it listed for a year). They are tough to sell unless you lie to people and then they still figure it out. I tell people the truth, but I wonder if others don't sometimes.

57634: RE: Does anyone own a rental property and make mon

11/1/2009 7:00:31 PM

Posted By: Guest

NO.

57638: RE: Does anyone own a rental property and make mon

11/1/2009 7:07:39 PM

Posted By: The REAL Jen

I check the MLS periodically and I was just surprised to see OF under 300k. I agree with you though...very risky purchase. I've seen several very cheap OF in SNH listed as well, but of course those are being held up by sand bags.

I don't really follow the beach nourishment news so I'm not sure if there is a possibility that it may one day be a reality, but if it did happen wouldn't it be a huge payoff for someone who purchased OF at those kinds of prices?

57648: RE: Does anyone own a rental property and make mon

11/2/2009 9:11:11 AM

Posted By: Guest

In 2000, we bought a small 4 bedroom house in Duck. The price good and during our last appraisal, it had increased about 2-3 times in value. We have been very forturnate in our rentals and generally fill the house 10-12 weeks out of the year. We have a hot tub and are about 400 yards back from the ocean. With all that said, we NEVER make money. The out of pocket costs can be tough - especially for big ticket items live HVAC. Plus, we pay the rental company a weekly fee and always have general maintenance items which add up. Not once have we ever regretted the purchase. Even during tough times we know that in the end, this will be one of our better decisions. We view this as a long term investment and plan on holding onto it for another 10-15 years. Once we're done working, we may sell this house along with our primary residence and hopefully move somewhere warm. Of course, we may opt to just move to this house. There's also the intangible benefit of the memories we've made with our family. I think buying in the OBX is a wise decision as long as you don't overestimate your immediate return. If you get lucky and do cover your expenses, good for you, but don't plan on it.

57661: RE: Does anyone own a rental property and make mon

11/2/2009 1:14:51 PM

Posted By: Guest

I agree with the rest of the owner, non-occupiers. We bought a house and since sold and moved to larger one hoping to take advantage of the current market conditions. The move was more for our family life style and less about getting a "good" deal. All said, yes there is stress in that you are always cash flow negative, but to us the personal use and pleasure we get from seeing our kids grow up at the beach far outweighs what amounts to a really, really expensive car payment.

57666: RE: Does anyone own a rental property and make mon

11/2/2009 2:11:28 PM

Posted By: Guest

If you are in a higher income tax bracket, the write off on the investment home is worth the extra out of pocket expenses incurred each year. The appreciation will be strong if you are able to hold on for the long term. Buying now is a tremendous advantage for those with the ability to qualify and make a down payment, but must be willing to ride it for a while.

57667: RE: Does anyone own a rental property and make mon

11/2/2009 2:12:56 PM

Posted By: Guest

I am no an owner, but have to say this. Where else but on the beach somewhere can you manage to have even a nice chunk of the mortgage paid? Homeowners everywhere struggle to make money on rental income, dealing with deadbeat tenants, repairs, damages, insurance and repairs. And those houses are on Everday Street, USA, not a beach! I think anyone who has the means to be lucky enough to purchase and own a home in a location like the OBX would be grateful, knowing that someday it will be free and clear, and theirs exclusively, no renters involved!

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