Mar 25 in General discussion
You Should NOT Buy a Median House to "Median-Rent It".
Before residential real estate investors crucify me, know that I own 40 houses (in addition to 1500 apartment units and 4 hotels). So I know the difference among 3 asset classes and the TL/DR is you should not buy houses to rent right now (the "median-kind" that is).
Here's the MATH:
1. The median home price in the US right now (2024) is $395,000
2. The median home rent however is $1,981 per month
3. The median home property tax is around $300/month
4. The median home property insurance is around $200/month
5. Assuming you put 20% down ($79,000) and at today's interest rate of 7.5%, your monthly mortgage payment on $316,000 mortgage is $2,208
6. By the time you add the taxes & insurance to that amount, your total house payment is $2,708/month
7. You are already negative $727 a month on a median house with a median rent!
8. By the time you factor in property management, maintenance and repairs, and having a budget for replacement reserves, you're looking at possibly a negative $1,227 a month or negative $14,724 a year cashflow. That's a NEGATIVE 18.6% cash-on-cash return.
I don't know why you would like to LOSE over 14 grand per year and you have to deal with tenants, toilets, and trash..So how do real estate investors like me make money with houses?
First, I invest in areas where the rents are higher vs the price (not median rent on median house price).
Second, I don't buy houses at market value. I buy them at 30-50% discount. How do I find those houses? They're not in the MLS most of the time. And they need substantial renovation (mold issues, structural problems, gut rehab) so the sellers are desperate to sell them.
If you're a high earner like doctors & business owners, you don't have the time to do 1 & 2. But there's a better way.
I will reveal that in my next post. Write "MEDIAN" or comment below and I will tag you when that post comes out.
Information presented is for educational purposes only and is not intended as, or may not be relied upon as tax, legal, investment or real estate advice. Consult your tax, legal, investment or real estate professional before investing. Information presented is not an offering.
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You Should NOT Buy a Median House to "Median-Rent It".
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