So most investors who are buying to hold Single Family Rental Property have basically 3 price points:
1. The Really Low End
2. The Cash Flow Property
3. The Buy and Hold Long Term
Here in the Kansas City Market and I am willing to guess in most markets these three price points will break down as follows.
The Really Low End: In this price range you can buy CHEAP houses that demand decent rents. We often see houses from $20,000 to $50,000 that rent from $400 to $800. Which is totally awesome, but comes with a huge disclaimer . . . You need to know how to manage this type of property.
If you have a property in the urban core that you purchase cheap that is already rented and cash flowing and then the tenant stops paying or moves out, then what. If you know how to handle this property you are going to be ok, but if you don’t you could end up with a vacant vandalized property that needs several thousand in repairs to get it back to rent ready agan.
The Cash Flow Property: Here you have a decent balance of property price and rent so that the property cash flows, just not the huge numbers as seen above. But there are more occupied homes in these neighborhoods, less crime and much more demand for these homes. Here in Kansas City this type of property is in HUGE Demand by the Hedgefunds and out of state buyers wanting solid properties that are cost effective and cash flow well AND that they can find property managers to manage.
Also in this price range the investors are planning that the values are going to increase in the next 3 to 5 years. Their plan is to buy low, rent for good cash flow, sell high and make a bunch of money. Although this is a good plan, I don’t see HUGE price appreciation in the Kansas City markets .
The Buy and Hold Long Term: These are the houses that are all updated in suburban neighborhoods that hold their value, rent easily and are easy to manage. However they don’t cash flow huge numbers and the strategy is to buy a solid house, make a bit of money renting it out, get some tax benefits and let the tenants pay off the house in 20 or 30 years.
The buyers of these properties typically don’t want a whole lot of headache or turn over. They typically have their income from some other source, but want to build up a nice little nest egg in 2 or 3 buy and hold long term rentals that they can rent out for 100% rental cash flow when they hit retirement and then when they get up there in years, then they can sell the house and live off the proceeds.
Here at KC Invest, we find ourselves quite often with houses in the first two categories . . . but this week we actually have two houses that would work in the last one. We have one house here in Kansas City priced at $119,900 that is all updated and would be a no headache rental for a buy and hold long term investor and we also have one that could have similar potential in Salt Lake City.
If you are looking for rental property, be sure to click our property tab to see what we have for sale and also be sure to tell us more about what you are looking for in a property.
So, Landlords Let the Tenant Pay Your Mortgage