Stay in or back out?

Question

Newbie investor here. We have a contract on a new construction home to rent and I felt great about it…until the least few days when a ton of also newly built homes on the same street hit the MLS for rental. We can be competitive with rent amount and almost all of the rentals are 3-2 and we have a 4-2. The large amount of new rentals all trying to rent at the same time we are makes me nervous. Stay the course or back out?

Nathan Harden · Answer

How much money do you have invested in the deal? Is your feasibility/contingency period over? What I am trying to ask, is there anyway that you can back out of this deal and get your EMD and other cash invested into the deal?

I would assume probably not. Keep the rental, you have a 4/2. If it's a high rent demand area, you'll be fine.

Tatum Littleton · Answer

Hi Jillian, I just came accross your post... sorry if I am jumping in too late but still wanted to give some encouragement! I am currently an investor and agent myself in Bryan/College Station, so I totally understand the hesitation and questioning. My wife and I recently bought an investment in Bryan and are always on the search for more as there are many different strategies to be utilized in the BCS. I would tend to agree with the comments that say to stick it out as well as what you said above, it is for the long haul and you will learn more as you go! There will always be those doubts in mind, its a big purchase and there will always be reasons not to, but really, it's about diversifying your portfolio and trying different things out where you can. Keep it up!!

Devin James · Answer

Hey Jillian Steelman,

I say keep it, for the reasons you just stated. Also, as Nathan Harden mentioned, you have a 4/2, so you should be fine.

Jillian Steelman · Answer

Thanks for the insight! We are only into the property for $500 earnest money so no real loss there. This is a college town that rents well to both families and students. Obviously investors see this as a great investment as did I…hence all the new houses listed as rentals. Just got a little nervous that so many rentals all listed at the same time. I just have to remember I’m in this for the long haul..and I can always come down off the rent a little the first year to be competitive and get someone in to get it rolling. Thanks for the support

Jared Hottle · Answer

Nothing nothing on numbers you seem to have the most desirable house on the block and a high demand area so stay the course. Investors that do not invest for reasons like this are the reasons the rest of us can make money. The bumps are what you climb on.

Jeff Copeland · Answer

There's not enough information to make a call like this, and we don't know what the penalties are for backing out. There are a lot of things to consider that we simply don't know the answers to.

@Jillian Steelman - One recent trend for larger SFH in many markets is coliving - You can often collect significantly higher rent, and (perhaps more importantly) almost eliminate vacancy costs.

For example, we are currently managing a 5-bedroom coliving property in St Petersburg, FL, and we are collecting twice as much rent ($5175/mo versus market rent of $2750) as we would with a traditional SFH long term rental. And even when we have a vacancy, the rent roll is still $4000/mo, compared to a SFH where you can expect about 6 weeks of vacancy (with zero income) every 1-3 years on average.

This is something you might want to consider for a 4/2.

Ideally, you want 5 or 6 bedrooms to really maximize the additional rent. But I have a 3/2 SFH under construction here in Florida and I'm seriously considering the coliving model, for the reduction in vacancy if nothing else.

Eliott Elias · Answer

Markets where there are rentals on every corner do terrible. Sounds like you won't be able to rent this place out, back out.

Theresa Harris · Answer

You said many of the new homes hit the market, but do you know if they will be rentals or owner occupied?  It isn't that unusual for lots of homes to hit the market around the same time when you are in a new development.

Stay in or back out?

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