Andrew Johnson I'm not saying this property will appreciate at 10% per year. I said 2% a year where the house would grow from 725k to 1.3mm over 30yrs. That's around an average 2% growth rate. I know I can't tell that that's going to happen but there's up Years and down Years so you need some small baseline. My ROI would be based on the 1.2mm proceeds and the cash invested. I understand paying a few grand to cover the costs each year adds up and you're losing money but I don't see this market where I am as one that both cash flows positively AND appreciates.
When one considers the 50% general thumb rule that's talked about on BP.com, I feel it just doesn't work in this area. If rents average around 4K for 2 units (2.5k + 1.5k) there's no shot in NYC that you're getting a mortgage for 2k unless you put down +40%. With a 20% down payment, the house would have to be less than 500k and those don't really exist, at least not in good neighborhoods or need A LOT of work. Otherwise if you're looking at houses in NYC/NJ area around 600-700k with the average mortgage at 20% down would be around 2.5k a month. After taxes, insurance, etc. your financing cost is over 3k. That leaves rents to cover 1k of operating expenses (cap ex, repairs, vacancy, etc.) a month to break even. Hard to cash flow.
I read a lot about people looking for cash flow positive properties and these are in areas of the country that are no where near as expensive as major cities like NYC. So it's easier to do because financing expenses of less than 2k can easily be covered by 4k in rent after assuming operating expenses.
Maybe I need to look in other markets or consider less desirable neighborhoods in my market. Nonetheless the latter is not where I would prefer to landlord as a newbie.
