If I want to sell for $450,000 how much rent should it produce?

Question

Hi Everyone - I just purchased a duplex in Miami, FL at a good price and I am looking for a quick sell. I don't currently landlord any properties so I wanted to ask the professionals. If you were buying a duplex for $450,000 how much rent would you expect to be receiving in total for the deal to make sense to you. Just in case you need more information about the property it is located in a good area in Miami called Coconut Grove, the taxes are around $4,400 and insurance is about $1300 + $400 for liability for the year. The tenant is responsible for water and electricity. Let me know if you need any further information.

I know everyone may have different preference, however would like to see what is the majority. Thank you in advance.

I know everyone may have different preference, however would like to see what is the majority.  Thank you in advance.

Justin Fox · Answer

$22,536 per year in principle and interest.

$4,400 per year in taxes (if the county/city doesn't try to bone you on the new sale down the road)

$1,700 per year for insurance

$4,500 per year repair/capex (assuming 1% of purchase, could be more)

$13,500 minimum return expected (15%, preferably more)

For me, only knowing the numbers you provided and never seeing the property's units, I would expect it to rent for at least $3,886/month.

Thomas S. · Answer

Based on the investment value of the property you need to be able to collect in the range of $3800/month plus to warrant the investment. If the area does not support rents in that range it is not a worth while investment as a rental.

This is only a rough ball park number. Many more variables enter into the equation in addition to property value.

Carlos Fong · Answer

Hi everyone thank you for all your feedback. I purchased the property for $335,000 with both units being rented out until the end of the year. Both tenants have been very good and long term tenants, therefore only paying $800 per month. The duplexes in the area are selling for $560,000 and above. A lot of developers are also buying a lot of duplexes and SFR to build custom homes and twinhomes that sell close to the millions.  The market rent for each unit ranges from $1500 - $2000 depending on condition of the unit. Therefore as is I will only get about $1500 per month. I feel my price is right compared to the closed and active sales in the area, however if an investor does not make enough cashflow I just don't see it moving if I am trying to sell fast. I have it listed for a few days without any interest. I am a Realtor, however I work mostly SFR, therefore I wanted to ask the experts to see if I may be priced to high.

The duplex was built in 1961, however seems it has been updated at some point ( I don't know for sure as I bought it from a wholesaler) it is 1300 square feet and each unit is 2 bedroom 1 bathroom. It has tile flooring throughout, central a/c, laundry closet, accordion shutters.

With all that being said what do you all believe would be a quick and fair sale price? Let me know if you need any more information. Or do you believe it may be a good property for me to keep and fix up the unit to raise the rent to around $1700 - $1800 each to get it rented quickly?

I would greatly appreciate any feedback.

Brent Coombs · Answer

The common theme in the responses so far seems to suggest that a gross return of around 0.85% per month (or preferably more) should work in THAT location, at THAT purchase price ie. anything LESS than $3.8k/m would seem to suggest an unwise investment. How does that number sit with you if you get "stuck" with it? Did you buy at a better price? Are the rents better than $3.8k/m?

Of course, you haven't given any other details, which might suggest reasons for it to be worth a different amount than what a pure dollars return on investment metric would dictate.

Could there be other factors that SHOULD be accounted for (such as: identical duplexes along the same street regularly sell for $600k+)? Cheers...

John Jobe · Answer

To pay $450,000 for a property it would have to be generating at least $5600 per month gross rents.  In reality I would like the gross rents to be closer to $6500 per month.  Rents are determined by the local market, purchase price really don't determine the monthly rent.

Jeff B. · Answer

Hate to burst your bubble, but there is no correlation of purchase price to fair rents that can be expected  (known as FMR).  Rents are determined by the locale, neighborhood and condition.

If I want to sell for $450,000 how much rent should it produce?

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