Rental Estimates for Up & Coming Neighborhoods

[Shawn Costley]

I live in Huntsville, AL and I'm looking at a few rental candidates for my own buy and hold portfolio (primarily SFR, 3/2 or better). This will be my first purchase. What I'm beginning to notice in several old neighborhoods are patches of blocks where rehabs are taking place--which is typically a good sign. A few of these properties are being sold and are rent ready. The ones I'm looking at are less than $100K.

I'm working the numbers in the BP Rental Calculator and am trying to ascertain what to charge for rent. I know (via rentometer and rental comps from my agent) what the rent is for the older homes. Because my potential purchase will be a newer rehabbed home, what would be a safe percentage markup to use in my calculations? If I utilize the current rental rates of the older homes and the purchase price of the rehab in the rental calculator, I'm unable to achieve either the Cash on Cash ROI (minimum 12%) or desired Cashflow ($200.00).

I'm concerned about setting a rental price that may be too high for the area--especially when your one of the first few properties going through the rehab process.  Any tips, tricks, hacks or recommendations?

Also, should I expect my Cash on Cash ROI and Cashflow numbers to work on properties below $100K or is the property price immaterial?

Thannks!