Rent to Value ratio? - Posted by Doug Pretorius

Posted by Chris on April 28, 2000 at 24:03:42:

Would you consider a market 100 miles away? A friend of mine turned me on to a market 100 miles from home and I have to be honest, I’ll never be able to thank him enough! As an example, I bought a 3unit building for $19,000 with a mortgage of 15K, PITI is about $200 per mo. RENTS are $900.00 per month with $700 positive cash Flow!! If I bought in my local market the same building, I would have paid about 65K to 85K with a PITI of $750 per mo. Rents of about 1000K per month, and thats only 250.00 positve flow. Don’t for get the 20% downpayment! Which cities in your area are most economically depressed? Take a drive. Getting back to your original question, take the first year gross potental income (PRI) and divide it by the sales price which equal the amount of years it would take to pay back the money borrowed for acquiring the property, Its also called the gross rent multplier. If the number is below 3 for 1-4 family units, I’m interested. At this point I investigate further. For 5-8 family units I look for a 5 or less on the Gross Rent Mulitplier. Remember the key is in the numbers. Good Luck. Rentals are a good Investment. Don’t be discuraged.

Rent to Value ratio? - Posted by Doug Pretorius

Posted by Doug Pretorius on April 27, 2000 at 22:02:55:

Living in an area with high prices and low rents, I’m wondering what is the minimum gross rental income to property value ratio you would consider buying?

And related to that question: Can you suggest any ways to get around the problem of having very few properties in which rent can cover expenses and mortgage payments? Or should I just forget about rentals all together?