All Forum Posts by: Adam Sha

I'm considering purchasing a property in a city where the average household income is around $50k per year, and houses are selling for $250k to $300k. Most rents in the area are around $1500 - $2,000 per month. However, the property I'm looking at is larger than other houses, and to make it a viable investment, I'd need to rent it out for about $2,600 per month.

My concern is that anyone renting this property could instead take out a mortgage on the same house, with monthly payments exceeding $2,000. Given that the local wages are relatively low, does this mean the property isn't a good investment? Would renters be willing to pay $2,600 a month, or would they be more inclined to purchase a home instead?

I would really appreciate some insights into how this formula works and whether this investment is feasible. Thanks in advance for your advice!

I'm at a crossroads and need some advice from those with experience in real estate. I'm trying to decide between building an Accessory Dwelling Unit (ADU) on my existing property (secured permit) and investing in a rental property in a cheaper market. Each option has its pros and cons, and I'm hoping to get some insights from this community to make a more informed decision.

Option 1: Building an ADU

Pros:

1. Increased Property Value: An ADU can significantly increase the value of my primary residence.
2. Control and Proximity: I can closely manage and maintain the property since it's on my land.
3. Potential for Higher Rent: ADUs in bay area can fetch a good rental price.
4. Flexible Use: ADUs can serve multiple purposes – home office, guest house, or rental unit.
5. No Additional Land Purchase: Utilizing existing property means no extra cost for land acquisition.
6. Foundation improvements: I will get an upgrade for my foundation which increase house stability.
7. Time to recover investment: around 10 years if I rent it for $1700 - paying cash.

Cons:

1. Impact on Primary Residence: Construction can be disruptive, foundation is old, and having tenants nearby might affect privacy.
2. Time to cash: The rental income will be delayed by at least 6 months as I'm building the ADU.
3. Tenant risk: California is tenant friendly and eviction can be difficult.
4. Time sink: takes so much effort and time while working full time.

Option 2: Buying Rental Property in a Cheaper Market

Pros:

1. Time to cash is immediate is about 40 days from closing time.
2. Landlord friendly: which means eviction and rent control in Landlord
3. Diversification: Investing in a different location spreads the risk.
4. Property Appreciation: Some emerging markets might offer significant appreciation over time.
5. Established Rental Market: Easier to find tenants in established rental markets with a high demand.
6. Potential to build an ADU: i can build on the property land.

Cons:

1. Lower Cash Flow: Properties in cheaper markets often have lower rental yields because I have to pay taxes, insurance, CapEx.
2. Market Risk: Cheaper markets might be cheaper for a reason, with slower appreciation and higher vacancy rates.
3. I won't fix my foundation.
4. Tax and insurance: have to pay those for the property
5. time to recover investment is 20 years assuming 1k cash flow - paying cash.

I would love to hear your thoughts and experiences with either option. What else should I consider? Are there any hidden pitfalls or unexpected benefits I might have missed?

Thanks in advance for your insights!

Which city would be the best investment for 2024 among Little Rock, AR, Atlanta, GA, and Nashville, TN for a buy-and-hold strategy aimed at long-term appreciation? Looking for a single family homes or multi-family duplex. also which areas would you invest if not the ones I mentioned above. landlord friendly states is a must for me.

Thanks everyone! those are all awesome tips. 

Thanks Greg. this is helpful! 

I'm facing a bit of a dilemma and could use some advice from this knowledgeable community. I'm considering two investment options and am torn between them:

1. Building an ADU in Berkeley: I have the opportunity to build a 316 sqft ADU in Berkeley, CA, which I could rent out for around $2,000 a month. The construction cost is estimated to be around $180,000.
2. Buying a Property in the Midwest: Alternatively, I could take the $180,000 and buy a property (or properties) in the Midwest, where the rental market is more affordable. The monthly rent would likely be lower, but the entry costs and potential regulatory hurdles might also be less.

Here are my main considerations:

• Rental Income: Higher in Berkeley ($2k/month) vs. potentially lower in the Midwest.
• Appreciation: Likely higher in Berkeley.
• Management: Easier to manage the ADU since it's close to home, but more regulatory headaches.
• Diversification and Simplicity: Potentially less hassle with a property in the Midwest.

Given these factors, what would you recommend? Has anyone had experience with either option and can share insights on rental yields, appreciation, management challenges, or any other considerations I might be missing? Thanks in advance for your thoughts!