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Updated over 8 years ago on . Most recent reply
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Rent out a newly built home?
BP community,
I've got kind of an odd ball question I wanted to get some opinions on. My wife and I recently moved from CA to IN (work related move). During the move process we decided to build a new house in IN. As you can image, the price of housing in IN vs CA is much lower and we thought yeah, why not build a new, big house? This of course was before I found BP and read books such as Rich Dad, Poor Dad, etc. I've come to regret the decision to build the big house as we are just two people living in a 5 bedroom 3,000 sq ft house. I've just more than ever started asking myself why?
I own one rental condo in CA and just purchased a rental SFR in Indiana so I do have a bit of land lording experience. My question to the BP community is: would it be wise to rent the above mentioned 5 bedroom newly built house? We do not want to sell it because we don't want to lose money on it. It is in one of the nicest communities in our city and would attract a more affluent tenant. My only worry is for such a large and new house, does it make sense to rent it? It would cash flow by about $300-500/month I believe. Any thoughts are much appreciated.
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I agree there are areas where SFHs do cash flow in the US the problem is most investors that are buying SFHs are new to the game and have zero understanding of the economics of the investment. A SFH generally has 50% expenses and most SFHs are over priced for the rental market due to the fact that a home owner will pay a higher price for a home that a investor.
Buying a $100,000 home and renting it for $800 - $1000 per month can work but many novice investors are paying closer to $200,000 and expecting positive cash flow with a rent of $1200. Yes it covers the mortgage and expenses today but in 10 - 15 years when the major repairs occur their 15 years of positive cash flow disappears.
A SFH in a normal residential community will never cash flow because the price to rent is out of balance, a low priced SFH in a rental area probably will cash flow. Buy why bother.
SFHs in some areas may cash flow but nothing even close to the scale of a multi in the same area. Why pay for a roof for every tenant when a single roof can cover multiple tenants.