How can rental/purchase prices be so incredibly inefficient?

[maxtower]

Derek,
haakee is right, the movement of interest rates won't affect your cash flow if you have a fixed rate mortgage. If interest rates go up, the resale value of the property could go down too. One good thing however, is that rents should go up faster because fewer people will be able to afford to buy creating more demand for your rental. This could offset somewhat the potential price depreciation of the home.

[scotchnrocks]

I'm pretty sure the rent money is taxable income, so take that into account.

[Wake up CALL]

[ QUOTE ]
I'm pretty sure the rent money is taxable income, so take that into account.

[/ QUOTE ]

Can't you just use the income to reduce the basis of your property? Or is that done by depreciation alone? Either way it is six of one and a half dozen of the other. You at least (essentially) end up deferring the income into the future with deflated dollars.

As long as you have negative cash flow their is no income to declare.

[Derek123]

Thanks for the replies. I guess I am surprised that there are as many properties with positive cash flows then. Is it just becuase people cant afford to buy or dont want to bother with tenants? If the market was completely efficient would the cash flow be 0 or would it be slightly negative/positive?

[DanS]

Thanks to all for the insight. If I think of any followups I'll let you all know.

-Dan

[john voight]

iv been looking on RE sites for multi unit properties. I find stuff like this; http://www.realtor.com/FindHome/HomeList...mp;lnksrc=00002

and am shocked at how easy it looks. I mean, sure the place dosn't look nice, but;

expenses:
mortgage = 2k
utilty bills 237x14units = 3318 (ultrahigh estimate imo)
other expenses (vacancy, repair ..) = 1000

= -$6318

income = 14x500rent
+$7000

+600$ profit/month

this nicer place claims to make 44k gross income;
http://www.realtor.com/FindHome/HomeList...mp;lnksrc=00002

[wiseheart]

Yeah assuming all your renters pay you,
and you do all the upkeep/management work
yourself...and then those pesky times when
the AC breaks and a new unit costs $5k for
parts/labor.

[Thremp]

JV,

Yes... That building you showed has 2 different sizes of units FWIW 4 900+ and 10 700+ obv they shouldn't rent for the same amount.

I'm confused about utilities. In some place I know they bundle water/electric/gas for a charge and the management will pay. Other places its all on you...

I do think you could do much of the work yourself on this with some help. (IE book keeping etc) 14 units isn't a gross amount to just have a voice mail line that you can check a couple times a day. Or perhaps a cheapo cell phone solely dedicated to the task. But I have exactly 0 knowledge of how much bitching people will do in gansta apts.

[maxtower]

I think the bitchin in gangsta appartments is minimal. I use to live in one, and the people who live there are used to be screwed over. Life has slapped them in the face many times. Your bigger problem is going to be collecting rent from deadbeats, because no one with decent credit is going to be moving in there. Vacancies shouldn't be too difficult because you'll be one of the cheapest places around and that always attracts someone.