Can anyone provide me with real numbers of their investments in US buy and hold properties they have recently purchased?

Question

Many folks are recommending that I should look into purchasing rental properties in the US instead of Ontario. I'd really like to see someones full financial analysis on their property. Purchase price, all expenses, rent, management fees, lawyer fees to get set up etc. I just want to know exactly what I can expect if I decide to get into the US market.

I'd also be interested in peoples recommendations for where to buy cheap property that will yield the best COC ratio. I'd like to do some high level research on property prices and expected rental income as well as expenses and vacancy rates.

Thanks so much in advance for your help. This Community has been great to me so far and I am so thankful!

Gordon Cuffe · Answer

purchase price 21k. work into house 5k. renter will pay 600 per month.  taxes 30 per month. property management 60 per month, insurance 40 per month. utilites 35 per month. that leaves net 435 per month on 26k invested.20% net roi.  Now check back with me in one year to see if I had a vacancy. If house is vacant one month then net roi goes down to 17%. I didn't use a lawyer just a title company to buy the house , that cost $700.0. house in Kansas city mo.

Jay Hinrichs · Answer

@Mike Purvis

easy back of napkin analysis just plug in 50%  of rent for operating cost then cost of capital and you will get to net cash flow.. Verify rents.. Many who sell rental houses in the US Turn Key will quote best case scenario. So you want to check that out.. check with independent PM for rent rates...

And stay out of war zones and lower class properties. they will not perform over time.

And remember on BP most folks that talk about a market do so because they sell that market or they rep for companies in the markets they like.. So they have a financial gain by directing you to a certain market.

All markets in the US have great deals and bad deals. and there is so much to choose from it becomes personal preference and of course your comfort level with who your dealing with.

Also you may want to consider something that you could use yourself to get out of the Canadian winters.. AZ SoCAl  FLA Vegas offer some nice deals with warm winter weather.

Just some thoughts.. I wrote a little E book for Austrialians investors giving some do's and don'ts for cash flow US RE happy to send it along if you like

Fred T. · Answer

Here's a thought for you, research the area you are looking to invest in based on your risk assessment and then study the numbers in that region.

All of these "rules of thumbs" are not always reliable and sometimes can get you into trouble...in a hurry.

Start with Knowledge of the USA Real Estate Landscape, Laws, Regulations, Processes, etc.

Do your Market Research based on your own Feasibility Study to determine what your Region sweet-spots should contain and not contain

Build a Local Team to advise you as to specific matrices (Vac Rates, Mgmt Rates, CAP Rates, Mtx/CapEx Reserves, General Expenses per SqFt, OER baseline, etc.) to use. The problem with using "Rules of Thumbs" are that there are no two markets identical. With that said, those could be used to do a 30,000ft view of the region of interest, but before you start investing, get out of the clouds and closer to the runway so you don't crash.

Plug the numbers in based on your homework

Formulate a Business Plan for that region

Execute your Plan

On to the next Market and do it all over again.

Welcome to USA Real Estate!/

Mike D'Arrigo · Answer

@Mike Purvis

In general, you're going to get the best CoC returns in the Midwest, but every market is different so be careful. Don't just look for the cheapest houses. Cheap isn't better and too many non U.S. residents have found that out the hard way.  Look for affordable markets with strong, vibrant economies. I like both Indianapolis and Kansas City. You can find info on both of those markets on my website. I wrote a report on how to choose a market that I can send you if you'd like.

Rusty Scott · Answer

Most recent for me in Indy. Purchase at 60k....spent 8k on rehab. mainly went to new furnace/ac and new plumbing throughout. Then painted entire interior, tiled bathroom.

Put 20% down, 80% financing @ 4.625%

Taxes and insurance total $170/mo.

ARV is in the 90 to 100k range. Was approved for a heloc 2nd on the property for $25k...so i can pull all my cash out of this deal if I chose.

Property in trendy area with quality tenant pool.

Rented for $925. Ran an open house first Saturday it was completed. Had 4 applicants, all which met screening qualifications easily. Rented to an older couple with 760+ credit and $70k in their savings account. They pay 2 months at a time and two weeks early.

Other may find better returns on paper and show no interest in these deals. Fine by me...I like the low headache ones.

Shawn Holsapple · Answer

@Mike Purvis is Hamilton, ON still an active market?  I lived in Calgary, AB for five years and had some friends that where investing in Hamilton because it was one of a few "affordable" Canadian rental markets.  Even then, the ROI was very low.

As mentioned above, here in the Midwest, we enjoy great ROI and somewhat easy to find opportunities.  Also, as mentioned earlier, I have learned [the hard way] that lower end rentals are NOT the way to go.

Here in Indianapolis, a good solid rental will average about $800-$850 for a decent working class neighborhood.  At one point, I had several homes that rented for under $700 and it was brutal.

I'm sure this is true with most markets, the closer to the bottom of the rent range you get, the closer to the bottom of the gene pool you get for a renter.

Jay Hinrichs · Answer

@Gordon  Cuffe

did you travel to the area first to check it out.. or did you do all this remotely from your home base?  if you traveled there you need to add those costs into the P and L .

Also you neglected any maintenance even a freshly rehabbed house will have some maintenance and in that price range your going to have tenants that are harder on the houses then average... to be safe add at least 75 a month.. if you do better great.. And then if your tenant is like most at that price point they stay one maybe two years.. so you will have a leasing fee when that happens and you will have a make ready which always cost 1k or more especially if you have any carpet at all.

I suspect over the next 4 years if you make 6 to 10% return on that investment you will be typical... If your one of the very few lucky ones and get the tenant from heaven that rents from you for years, Never calls to complain keeps the place perfect ext. you can hit your best case scenario numbers as you posted above.

Pretty rare at that price point to have best case scenario... YOu have tenant Pools  top shelf tenants 1000 a month or more  medium 700 to 1000 and then bottom 600 and under.. your dealing with the bottom of the tenant pool .. My experience with this type of tenant is they are one argument with the baby daddy or flat tire from not paying rent... But like you said check back in a few years and lets see how you did.

I hear its warm in BAy Area today !!  So Sac is probably warmer.

Lane Kawaoka · Answer

A 50% is a good conservative rule for expenses.

An A-,A property (w/10% Property Management) use 80% *freshly full rehab

An B,B+ property (w/10% Property Management) use 70% *freshly full rehab

An C,C+ property (w/10% Property Management) use 50-60% *freshly full rehab

Marc M. · Answer

Jay, would you mind sending that book to me?  I'd greatly appreciate it.  MDREinvestments@gmail.com.  Many thanks.

Can anyone provide me with real numbers of their investments in US buy and hold properties they have recently purchased?

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