Where are the 2k rent properties at?

Question

There's tons of discussions about great rental markets for 80k houses that rent for 800/mo (cleveland, memphis, KC, Indy, OKC are perennial big hitters).

What about the markets that have fairly easily rentable 2k houses in B class that still cashflow, albeit not as well as the ones mentioned above?  I'm not at the point of apartment investing yet, but I have a bunch of 80-100k properties and though the returns are really good, this just isn't scalable.  I want fewer properties that cash flow more, sacrificing COC returns so in 5 years I can exit the rat race.  Instead of 50 houses cash flowing 500 each, I want 25 houses cash flowing 1k each.  Managing 10 units already dispersed through the country and it's not as passive as I thought, even with PM.  5x this just makes it another JOB.

John Warren · Answer

@Shiv Jey I personally think it is time for you to jump to multifamily. Managing the manager is definitely not a 100% passive thing, and if you can trade those 10 houses for 10 apartments then you only need to have one conversation with your PM, review one set of books, do one tax return, etc. It just doesn't make sense to buy 100 houses. For me, the tax preparation alone proves this out. Most newer investors don't think about what a pain it would be to have to prepare books every year for multiple properties.

Rhett Tullis · Answer

any rental over $1400 in okc is hard to rent relatively.  that is the breaking point for most tenants you would want on whether they can/will buy a home.

Alyssa Dyer · Answer

Hey @Shiv Jey you might be able to push as high as $1500/month on a $150k property in OKC with decent cash flow. Typically I stick to the C or C- areas to max out returns so I'm looking at 60-80k rentals with 8% caps, but I've seen investors in the last year lockdown properties here at $240k, with rents at $2,100 and cash flow at $333/month. That's about a 7% cap on a $250k property.. not bad! Vacancy might be a bit higher at that point because a tenant paying that much in rent can typically purchase a property here.. generally, they're saving to move into a house or in some sort of transitional situation. Working with a PM that has experience in luxury rentals should be helpful.

Because you asked where the deals were I wanted to offer an overview of what I see in OKC!

Cassi Justiz · Answer

I think what you are going to find is that there is a reason people stick with the 1% rule.  These 2,000/month rentals are probably going to be $300k+ properties in most markets. A 2k/month rental is not likely going to cashflow $1k per month. Most people end up trading cashflow for other things when they go into the higher price point rentals. Your taxes, insurance, HOA fees, vacancy, maintenance, etc etc etc will all increase proportionally to the home price.

I would probably stick with growing your portfolio with mid-range cash flowing rentals (focus on low maintenance properties), or scale up into multifamily units (if the numbers make sense). I would try sticking to one area so instead of managing 10 different property managers in 10 cities, you can get one great property manager and have everything go through them.

Derek Harris · Answer

If you want to scale faster, multifamily is the way to go. For single family houses, areas with higher rental incomes have a harder time meeting the 1% rule which means the cash on cash return will not be as high. For example, you could easily find rental homes in Austin, TX that rent for 2k per month, but you'll end up spending (after rehab) over 300k.

Theresa Harris · Answer

They are going to come at a higher price point.  Look for places with low vacancy rates.

Brian Rosher · Answer

The higher the rents, the less you are going to cash flow.  In a decent neighborhood around here you can easily get over $2k per month for a 3br house in a good school neighborhood.  But its going to be expensive home to buy.  BRRRR is an option, but it wont cash flow that great after refinance.

For that many units, you should be looking at a larger commercial/apartment property rather than a ton of little houses in my opinion.  Getting all the units under less roofs should make management a lot easier.

Jeff Jansen · Answer

@Shiv Jey Have you looked into the market in upstate NY?

Angelica Vargas · Answer

@Shiv Jey hi! I can say that Jersey has a bunch of 2 and 3 BR apts going for 2k/ month.

The tough part is finding deals in the area that make it worth buying. Homes are super pricey out here.

That and the laws in NY/NJ favor tenants so you have to be careful.

But hey, there's always a motivated seller out there so you never know.

Good luck!

Where are the 2k rent properties at?

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