Just bought another 12% yield!

[TexasHusker]

I do hear that a lot of R/E investors use the 1% rule as the roughest calculation for a viable property. 1% rule being, as long as you can rent the house for 1% of total value, then you should be able to rent at a profit.

TH above situation follows this. $150k house, rents for $1500/mo.

There are a LOT more calculations that can skew this (taxes, area, x, y, z, etc..)

But it is a pretty good jumping off point for considering a property.

Yeah where I live, property taxes run about 2% of the home's appraised value annually. My personal residence is valued at around $350K, and my taxes run about $7K +/-. That puts a serious crimp on your return, which is partly why I started buying vacation property in TN. In TN property taxes run about .5% of the home's value annual.

To give you a feel my returns in TN, I have one cabin I bought for $240K in 2005. I overpaid by $40K - the market crashed in 2008.

My gross rents are about $38K a year.

Expenses annually:

Utilities $4K
Insurance $3K
R&M $3K
Cable $1K
Taxes $1K
Lawn $2K

So I'm yielding about $24,000 net. About a 10% return on investment. If you add in depreciation tax savings, that boosts it to 11%.


I have another one that I am rebuilding from the Gatlinburg fires - I will have around $245K in that when it's all said and done.

I am fully expecting it to do $50K per year rents.

Expenses will be approx $2K less than cabin 1, so my net on that one should be around $38K annual, translating into about a 16% annual ROI.



I have two other cabins - on the same lot - that I have about $280K invested in.

They do about $50K a year all total, with about $15K in annual expenses, translating into $35K a year, or about 13% annual ROI.


I'm not just knocking it out of the park, but the returns are quite good, and stable. My strategy is to use the equity in these properties to buy more and keep going.

[bjl584]

Yeah where I live, property taxes run about 2% of the home's appraised value annually. My personal residence is valued at around $350K, and my taxes run about $7K +/-. That puts a serious crimp on your return, which is partly why I started buying vacation property in TN. In TN property taxes run about .5% of the home's value annual.

To give you a feel my returns in TN, I have one cabin I bought for $240K in 2005. I overpaid by $40K - the market crashed in 2008.

My gross rents are about $38K a year.

Expenses annually:

Utilities $4K
Insurance $3K
R&M $3K
Cable $1K
Taxes $1K
Lawn $2K

So I'm yielding about $24,000 net. About a 10% return on investment. If you add in depreciation tax savings, that boosts it to 11%.


I have another one that I am rebuilding from the Gatlinburg fires - I will have around $245K in that when it's all said and done.

I am fully expecting it to do $50K per year rents.

Expenses will be approx $2K less than cabin 1, so my net on that one should be around $38K annual, translating into about a 16% annual ROI.



I have two other cabins - on the same lot - that I have about $280K invested in.

They do about $50K a year all total, with about $15K in annual expenses, translating into $35K a year, or about 13% annual ROI.


I'm not just knocking it out of the park, but the returns are quite good, and stable. My strategy is to use the equity in these properties to buy more and keep going.

Are you talking about taking the rental income and using that to buy more units, or do you want to cash out refi them?

[TexasHusker]

Are you talking about taking the rental income and using that to buy more units, or do you want to cash out refi them?

CORF. I live on the income.

[TexasHusker]

UPDATE: Just passed $30K gross through 10 months!

[LivingAlmostLarge]

What made you decide on TN? I am still researching areas. I think I can see on BP just reading a lot of people who do this don't do it for less than 10%+ yields.

[TexasHusker]

What made you decide on TN? I am still researching areas. I think I can see on BP just reading a lot of people who do this don't do it for less than 10%+ yields.

I picked eastern TN because it is somewhat of a year-round destination for vacationers - you have guests year round. The above mentioned cabin has done around 300 nights rented in a one year period.

For income, vacation homes don't work well in more seasonal vacation areas. For example, I wouldn't touch one in Colorado. Too seasonal.

If I was looking for a vacation rental for investment income year-round, I would focus on the following areas:

Southern CA
Port Townsend WA
Victoria BC
South Florida
Florida Keys
Eastern TN

When evaluating a vacation property for rent, I need at least .15 ratio for the numbers to work. Example: I bought this cabin for $182K. Rents are around $31K a year conservatively. Take 31K and divide it into $182K. That's .17, which is outstanding. I'll buy one of those every time if I have the $$.

[LivingAlmostLarge]

How would manage renting a property internationally.

[disneysteve]

How would manage renting a property internationally.

I can’t comment from personal experience but I know that many of the homes in the Disney World area are owned by British folks. They come for holiday for several weeks at a time so it’s beneficial to own a place and rent it out the rest of the year.

[TexasHusker]

How would manage renting a property internationally.

No reason you can’t buy an investment property anywhere in the world. Managing one from 1,000 miles away would be no different than 2000 miles away.

Or you can get land and a home for free in the Pitcairn Islands

[bjl584]

How would manage renting a property internationally.

Investors treat it like any other investment.
I know a real estate investor that has never even physically been to some of his properties. Everything is handled remotely by a team of property managers, contractors, and other professionals. Once everything is set up it's pretty hands off.

[TexasHusker]

Investors treat it like any other investment.
I know a real estate investor that has never even physically been to some of his properties. Everything is handled remotely by a team of property managers, contractors, and other professionals. Once everything is set up it's pretty hands off.

True. I get out to my properties once a year or so.