From ’29′ at VREAA 21 Feb 2011 9:47am-
1494 West 40th Ave, Vancouver (40th & Granville)
3175 sqft home; 6905 sqft lot
Listed for rent on craiglist: $4,300 x12 = $51,600 p.a. “prefer long term lease”
Listed for sale MLS V859209: Sales price $1,288,000
Cap rate: 4% [High for a west side SFH, many renting at 2% cap rates. -ed.]
http://postimage.org/image/782rwdpg/
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’29′ adds: “I came across sellers, to fool buyers, arranged with their tenants to rent at higher than market rents with a written promise to return the excess rents collected plus a bonus when the house was sold.”
For a RE investor not dependent on capital gains, they’d look at this as being closer to a 1-2% cap rate, as you have no offsets against the raw rent in your calc.
http://en.wikipedia.org/wiki/Capitalization_rate
Knock off 2% for property taxes and maintenance. Knock off a month per year in vacancy / turnover, and there you have it – 1.6% cap rate. These reductions are probably quite generous and should be higher – ask yourself what an old house costs to maintain, and how long these tend to sit between tenants, as well as cleanup between tenants.
All true.
Makes you wonder about the “$1.2M” properties renting out for $2.5K per month!
What’s to wonder?
Mom and Pop are old and living in assisted care. Kids are simply renting out the family home until the parents finally kick off. I bet the parents didn’t pay 1.2 mil for the house…probably closer to 5-10k back in the day…so, as long as maintenance and taxes are covered where’s the loss? These kinds of rentals are most likely mortgage free.
My dad and his siblings rented their family home out. The goal was to have all expenses covered by the rent…not to make a buck. The buck got made when they sold the property.
This house is located right on the corner of West 40th and Granville. The noise from Granville St. must be deafening. I love old homes and am appalled at the tear-down culture that’s over-taken Vancouver, but I sure wouldn’t be living in this house for $4,300. a month.