I paid $345k last year in South Lake Tahoe. House with cottage. Gross rent $3400. 8 cap with expenses… tax about $3600. Insurance $1800, high fire danger area.
Show your number please. I did some computation, not much better. In fact, I run some numbers for a few places in USA, the cap rates seem to be around 4-5%. Not much difference. I think the market self arbitraged.
A 5 cap doesn’t make a lot of sense with a 4% loan.
No cash flow with 20% down. Better hope appreciation continues. 10% is not sustainable long term
The post here is not about land lording. Is from the perspective of a renter. According to Harriet, should buy and not rent. But my figures show should rent and not buy. Of course, for us, we tend to look from the perspective of land lord. For me, I don’t look at individual houses or stocks, I think in term of portfolio… quite different 
Phoenix property tax is about 1k a year for a 300k house. Actually property tax increase and house market value increases seems to be unrelated. Property tax tracks inflation instead.
For a 300k house, rent 2k. Cap rate is 7%
Renting is cheaper in the short run if appreciation is 0. That explains 90% of USA.
But over longer time horizon, buying is better because
-
the first letter of PITA is P, the principal. Only interests is expense. Principal money you are paying yourself. As time goes on it will be bigger and bigger part of PITA.
-
After 30 years you pay off the whole house. Big drop in payment. Rent will never stop.
Does that include water sewer garbage insurance gardener maintenance management?
Visits to Phoenix?
Frankly too generic for me. Why don’t just randomly select a house and do the figure. I don’t find generic numbers useful. In any case, we are diverting. I just want to look from the perspective of a tenant, why is ok to rent and not try to buy. Not from a land lord.
Btw, hard to believe can get cap rate of 7% from a $300k house charging $2k rent.
If it doesn’t sense to pay $2000 for rent for a house that is worth only $316k, won’t it even more surprising that there are people who is willing to pay higher rent like in South Lake Tahoe, Phoenix and Las Vegas? Can anyone explain why? In Austin, PITI + HOA (+ maintenance & repairs + accrued asset replacement) is higher than rent, so it makes sense that some would rent. But in SLT, Phoenix and LV, it is claimed that PITI + HOA is much less than rent, why would anyone rent?
Fantastic Hanera. I need to visit Austin. I like Dallas/Plano area ok.
I’m heading out to Phoenix in 2 wks to check around the area. Socal migrations there happening.
1 Like
In Phoenix there are fair number of part-time homes for rent (snow birds own?). Very hard to find homes to rent via airbnb or vrbo Nov-Apr. They charge high. I’m renting a 1200sq house for $205 (incl all the various fees, taxes, etc) per night. All the better homes were all booked up through April.
Sorry, this was actually 1000 sq ft home. 2 bedroom 2 baths. I needed a house since my father and his wife are traveling with us.
Why is there no love for Tampa and Orlando? For multifam cap rates are 7 to 9% last time I checked.
Manch - where are you getting the “tons of listings” in Phoenix? Thanks.
Those are multi family listings on loopnet.
Places like Florida look good from far but a far from good.
You really need to know the neighborhoods. High caps often mean high expenses and high crime.
I found a gold mine in South Lake Tahoe. Plenty of renters, low inventory, hardly any new construction allowed, its renters are low income with no cash, have to get roommates. They don’t have the option to buy. So most of the competition I have when buying is BA people looking for vacation homes. But they look for turnkey move in ready. I buy fixers that need time and money… Vacation home buyers don’t want to be bothered, don’t have the time… Rents are going up at 10% annually and values too. 6-12 Caps
I did invest in Phoenix, Gilbert actually, large multi family development. We will sell when fully rented.
Have done the same thing in Texas and Florida. Build then sell or fix and flip… in our case projected 28% IRR.
Much better than buying and holding.
You are forgetting the tax savings the person would have should he/she own a house vs. rent. Also $295 for homeowners’ insurance for a $316K house is too much.
Cap rate is 5% now.
Thought experiment.
Have I bought the SFH as fixer upper, could get 20% discount.
Then rent to a group of low income un-related guys, could get 30% extra rent.
Then my yield would be 2250*12 * 1.3/ (325k * 0.8) = 13.5% which gives 10% cap rate, magic!!!
For those who doesn’t aware of the cheating maths, I didn’t add back the cost of fixing up the house for rental to the purchase price 
and assume that the running cost of rental is the same as for good quality tenants.
Wasn’t in your original statement 
Your above statement seem accurate based on response:
So what’s with all these buy vs. rent posts and negativity on rental yields in Cupertino - are you trying to sell your fortress and buy more in TX? 
1 Like