I have done some searches recently for investors looking to purchase rental houses that can pencil out in the black from the first day of ownership. I have found 28 homes listed between $150,000 and $200,000, currently on the market in Bend, that have been built in 2007 or later, 1500 sq. ft. or larger, 3 bedrooms, 2 ½ baths, many are new and never lived in, and most are bank owned. Many can be bought for the target price of $175,000. Some for less. These are often builder’s spec houses that the builder had to give to the bank. They are not generally short sales. I have singled out 2007 or later built homes because they do not require repair or refurbishing and are generally very nice, some with higher end features like stone fireplaces, tile counters and stainless appliances.
I am working with a property management company who has tenants looking for this type home to rent for $950 to $1000 a month. The property manager will place quality tenants for ¼ of a month’s rent. You manage the property yourself afterward. With 25% down these properties can be financed at 5.25% (quoted from lenders I know) and will cash flow in the black from the first day rented. Any of these would require about $45K+/- to get into including closing costs and have a good potential to appreciate dramatically with any market recovery. With the depreciation write off included the ROI on the initial investment can be 10 to 15% depending on your tax bracket. You can see that with a market recovery a home bought at $175 and appreciating to $225K in two to three years is not unrealistic. That would be a 100% appreciation on your initial down payment and you would not have to feed it money in the mean time.
If you are looking to roll cash from other investments or have money parked waiting for good opportunities now may be the time to broadening your investment portfolio into some rental homes. It is difficult to determine whether we have finally seen the bottom of this market but not difficult to see these are some great deals on Bend single family residences. Market activity is picking up even though spring is still a few days off and today it is snowing! I prefer these SFR rentals to multi units because the potential price of the house in the future is not determined by the rents as there are first time buyers and other market segments that these homes are ideal for.
If you are interested in seeing what some of these homes look like email me back and I will send you a MLS link to see for yourself or I can show them at your convenience. It is said that the money is made in real estate when you buy, not when you sell. These homes might be just that opportunity for you.