patrick.net

It totally depends on the location. I have a ton of statistics in my Property Finder service, and gross returns vary widely by neighborhood. In general, pleasant safe neighborhoods have exceptionally low returns, like 3% or 4% of purchase price, and won't cover the interest, taxes, and maintenance. So you'll lose money as a landlord there. The landlords that are still in business are the ones that bought long ago, and so benefit from the institutional tax evasion of Prop 13.

But in sketchier neighborhoods, gross returns are much higher, maybe 10% or more, though then of course you have issues with actually collecting the rent.

My vacancy rate for 4 years for 2 properties have been 4 months. Last year, I had to lower my rent in one to keep a tenant from moving cause the HOA kept harassing him for a patch of grass. In the other house, the rent has been steadily going up. I'm on month 7 for a short sale to get a third property.

It totally depends on the location. I have a ton of statistics in my Property Finder service, and gross returns vary widely by neighborhood. In general, pleasant safe neighborhoods have exceptionally low returns, like 3% or 4% of purchase price, and won’t cover the interest, taxes, and maintenance. So you’ll lose money as a landlord there. The landlords that are still in business are the ones that bought long ago, and so benefit from the institutional tax evasion of Prop 13.
But in sketchier neighborhoods, gross returns are much higher, maybe 10% or more, though then of course you have issues with actually collecting the rent.

Sure, but 20-30 years from now, you can be one of those landlords who could be saying, "way back when, when I initially bought this investment, I had this crappy cap rate of 3-4%, but now..."

When you say you want to have a cap rate of 10% is that over the life of the investment? or just on day number one when you buy it?

Just for sake of argument, my CAP rate for my apple stock purchase in in 1997 was crappy for a better part of a decade. I'm glad I didn't do too much math analysis on it and held on to it.

I agree. We recently put up a rental on the market with a ridiculous asking price. Surprisingly, many many many people responded.

I just entered contract again with a home for $465k. It's a short sale and the bank is talking to us trying to make it work. The tenants in there are paying $1950 for the 3/2 upstairs, and $1200 for the 2/1 downstairs in-law. My would be mortgage is $1100/mo. It's just a shame I plan to live in the home. The property tax is a huge chunk. I personally won't even care if prices plummet afterwards. It'd just reduce my property tax over time.

In MOST of the Country, it's always a pretty good 'time' to be a landlord if you don't mind the business and have positive cash flow. It's not glamorous. It's a slow slog to work up to a real business, unless you just inherited a dozen houses, a complex, or drop a lot of capital down some other way. I have lived in 5 states, from the most major of cities (NYC) to podunk. Many landlords are people who inherited houses or apartment buildings from family. In those cases, they paid "nothing" for the investment, and have no mortgage costs, just upkeep, taxes, etc.

I'll always remember a 'new' landlord I met. He was a retiree who wanted to stay busy. He had just bought a 6 unit apartment house in Richmond VA, for which he paid all of $275,000. I rented one of the units for $625/mo. I asked him about positive cash flow and his response was, "son, I wouldn't have bought without positive cash flow". We were both quite happy with the arrangement.

Exactly. What I find amusing is the argument prevalent in the bay area, that revolve around some complicated calculus on how it will 'work out over the long run', generally including an assumption of 'appreciation'. Maybe it will appreciate, maybe not, but every professional landlord I have ever known makes sure he or she has positive cash flow from day one. It's really simple, actually.

pkowen says

In MOST of the Country, it’s always a pretty good ‘time’ to be a landlord if you don’t mind the business and have positive cash flow. It’s not glamorous. It’s a slow slog to work up to a real business, unless you just inherited a dozen houses, a complex, or drop a lot of capital down some other way. I have lived in 5 states, from the most major of cities (NYC) to podunk. Many landlords are people who inherited houses or apartment buildings from family. In those cases, they paid “nothing” for the investment, and have no mortgage costs, just upkeep, taxes, etc.
I’ll always remember a ‘new’ landlord I met. He was a retiree who wanted to stay busy. He had just bought a 6 unit apartment house in Richmond VA, for which he paid all of $275,000. I rented one of the units for $625/mo. I asked him about positive cash flow and his response was, “son, I wouldn’t have bought without positive cash flow”. We were both quite happy with the arrangement.
Exactly. What I find amusing is the argument prevalent in the bay area, that revolve around some complicated calculus on how it will ‘work out over the long run’, generally including an assumption of ‘appreciation’. Maybe it will appreciate, maybe not, but every professional landlord I have ever known makes sure he or she has positive cash flow from day one. It’s really simple, actually.

What if it's break even for 5 years and then a slow incremental increase from then on?