7 ms·
Unfortunately, Airbnb is probably the only way a middle-class family can earn money on investment properties. No one in their right mind would rent a $1,000,000
by hb3b 8y ago
Unfortunately, Airbnb is probably the only way a middle-class family can earn money on investment properties. No one in their right mind would rent a $1,000,000 condo for (1% rule) $10,000.
- ng-user 8y agoAre you referring to NYC in general? Because certainly it's possible to earn money (or at least increase equity) with investment properties.
- enervate 8y agowhat about REITs?
- jedberg 8y agoWhat is the 1% rule? As a landlord I usually assume 0.5% per year. So a million dollar condo would be 50K a year, or about $4200/mo, which is exactly in line with current nyc rents.
- sidlls 8y agoThe rule is a residential rental is only worth the risk or has a good return if the property can be rented at about 1% of the value per month or more (e.g. a $100k home should rent for $1k/mo). I generally try to get an annual cap rate of 9% or more (1%/mo less expenses).
- jedberg 8y agoWow. That rule must only apply in smaller cities. I can't think of a single residential property in the Bay Area that would even come close to that. On the other hand, all the properties I manage do 0.5% per year and have all been profitable, not even including the appreciation on the property.
- sidlls 8y agoNot smaller, just different areas. It's fairly easy to achieve that in the Midwest and larger urban areas in the southeast. I typically got ~0.8%/mo or more. I'd go so far as to say that if single family residential is your strategy it's better to take the multi-million dollar investment in a single home in the Bay and make one in 5-7 (or more) homes elsewhere. The appreciation is drastically lower but the cap rates are amazing (much higher cash flow) and the risk is spread out. Of course, with that kind of investment it's better to go multi-family or commercial anyway.
- IkmoIkmo 8y agoThe 1% rule applies to cashflow investors, NYC is basically at the complete other end of the spectrum and this rule makes no sense there.
- michaelmrose 8y agoIf you have a million dollar condo in addition to your primary residence then you aren't middle class by any common sense definition of the word middle.