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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: staring who wrote (59242)	3/16/2017 8:21:40 PM
From: E_K_S	Read Replies (1) \| Respond to of 78814

A rental property is different from owning your own home. There are a lot of intangibles you want in your own home that are not required in a rental. You can do a quick back of the envelope calculation to see what your capitalization rate is on the property if it you treat your investment like it was a rental. The capitalization rate, often just called the cap rate, is the ratio of Net Operating Income (NOI) to property asset value. So, for example, if a property was listed for $1,000,000 and generated an NOI of $100,000, then the cap rate would be $100,000/$1,000,000, or 10%. First determine what the market rent is for the property and come up with an annualized rent roll. Then, calculate your annual property taxes and annual insurance expenses. Some property owners also use a 2% (as high as 5%) figure to determine the annual maintenance budget. Assume cash on cash (no mortgage) capitalization rate. Add all of your expenses subtract from your rent roll to determine your Net Operating income (NOI). Calculate your Cap Rate. It will be different especially if you have a lot of fix up costs but anything over 10% is excellent. 8%-10% is still quite good. $5%-8% is ok especially if you get a fixed 4% mortgage. Avoid anything less but remember property values is all about location and if you can add significant value by doing your own fix up. In the 90's I did a lot of 'flips' here in Silicon Valley and the value (and potential gain) was ALWAYS in your Buy. If you buy at the right 'value' price, you will pretty mush never lose money. This is similar to buying value stocks. You buy at the right value price, you will do fine. With real estate, you can add value yourself by doing (or outsourcing) the fix up. For stocks, it's your management that is in charge of that 'fix-up'. Good luck and if need be, pay a bit extra for the better location. EKS

To: staring who wrote (59242)	3/16/2017 9:14:35 PM
From: Spekulatius	Read Replies (2) \| Respond to of 78814

I guess, I don't fully understand your question - are you saying that you intend to buy a house that you want to rent out and then live in it yourself in a couple of years? If that is the case, I would like at this as a buy vs rent decision. If renting is way cheaper than owning a comparable house, I would rent; if owning is comparable or even cheaper then renting, I would like to own. As E_K_S pointed out location is important , look at your neighborhood, avoid busy streets, commercial activities too close to your home and the layout and quality of the house build. Most importantly, make sure that your significant other (if you have one) likes the house :-). I am not sure where you are located (Europe) but a lot of residential RE has become quietly bubbly. relatively speaking, some areas in the US are relative bargains. FWIW, I purchased my current home 2 years ago for an estimated 5.8% rent yield (taking into account RE taxes), which I think is a good deal, if you can finance it with a fixed rate 3.X% 39 year mortgage.