Worth buying a rental property in this market or wait it out?

Question

with rates going up right now cash flow is harder than ever with many buying off appreciation which is speculation and I don't wanna buy focus on that,

I'm looking at NC right now for a single fam with just hoping to get a 3% cocr return if that is doable after PM,Vacancy,CAPEX repairs, etc total 26%.

i like NC because of its growth aspects and pop growth numbers,

using 180k, would it be smart to go ahead ad buy a single fam there hire a PM, and visit it twice a year>?

my market is NJ and spends 4 hours seeing properties with taxes being 14k Avg now a year

my goal is to buy and hold never sell.  only another market I'm willing to buy is PA since is near by that is it tho,

any advice or tips or what to do to make my goal come true?

Michael Dumler · Answer

@Mario Gonzalez your fear of interest rates is just another excuse individuals give themselves not to invest in real estate. You need to look at the asset from all angles. For instance, even though interest rates are on the rise, rents are as well. Many investors overlook a tenant-occupied property where the current rents are below market, but miss the opportunity of analyzing the deal at market value rents after the tenant's lease expires. Furthermore, maybe your market is not suitable for LTRs, you may have to branch into different investment strategies such as STRs via AirBNB. Connect with other investors in your desired market and see what is working for them. Even in this competitive market, you can certainly find a property that performs greater than a 3% CoC. When it comes to investing out of state, and you'll hear many others harp on this, you need to develop a team of vendors that know the market and are top performers in their industry. Lastly, seeing the property twice a year is fine. I work with investors that have never even seen their properties before, just make sure you have systems in place to ensure that the asset performs. Hope this all makes sense and helps!

Theresa Harris · Answer

Interest rates are only going to keep going up. They've been at record lows for a very long time.  Find a place where the numbers work, and buy it.

Joshua Noth · Answer

@Mario Gonzalez Not an expert in the areas, so I can't speak to those specifically.  But, your overall question of waiting it out... you may be waiting for a really, really long time.  Interest rates do not look like they are slowing down any time soon, and the prices of homes will very likely only continue to follow that trend as well.

Kevin P. · Answer

Well I see no reason to invest out of state. It's fine for some but it's just adding a layer of complexity that I could do without. I've done it before and now I invest exclusively in New Jersey though I'm open to Pennsylvania for the right deal because it's only an hour or two away. I have found all my deals on the MLS and with rental rates the way they are now there's plenty of cash flow. I'm sure you wouldn't have to settle for anything less than 10% cash on cash return. You have enough money there to invest in two or three houses if you're going single family.

Kevin P. · Answer

I invest in central New Jersey, mostly Middletown township. Well covid did present problems and new laws to deal with but I would still rather deal locally. With regard to the law things are back to usual. I will have an occasional eviction to deal with but it hasn't stopped me from growing my rental business.

Kevin P. · Answer

Mario, anywhere where the taxes are $14,000 a year does not sound like a rental market. Although there are many places around that rent for higher prices I limit myself to those $2,500 or less per month. Those are not with the taxes that you're talking about. Generally they're $8,000 or less. These are just better rental markets. It's also more reasonable if for some reason the tenant is not paying. Ideally I buy around $250,000 with an after repair value of around $325,000. At this time it's harder to find a deal like that but I can find something close to it. Then I refinance and do it again. I barely even think about the interest rate. It's just one factor. In this time of rising interest rates the current rates are going to look pretty good next year. Think of it as a hedge against inflation for all that capital you've saved. Good luck.

Sean McDonnell · Answer

Did you mean 30% Cash on cash return? There are many properties here in NC that are on the market that will give you a 3% cash on cash return after management fees.

Shawn Mcenteer · Answer

@Mario Gonzalez this has been the question since I started investing, so far almost 10 years in as real estate investors and every year everyone wishes they purchased the previous year becuase "this year is wild!" Someone will be right at some point but just got an off market deal UC today that will bring my client approximately 2k/month in cash flow and a boat load of equity.   Prices of homes are going up so are taxes, best part is so are rents!

Nicole Heasley Beitenman · Answer

There is always a reason to wait. Interest rates are too high. Prices are too high. Mercury isn't in retrograde. Analyze deals until the numbers work and take action.

Worth buying a rental property in this market or wait it out?

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