It appears you most certainly did make money as a landlord. Correct me if I’m wrong:
With the numbers you provided it appears you’re almost $100k into the mortgage, a ROI of 5.75% - that’s assuming you made no profit from rent, just breaking even. A $100/month profit takes that to 6% ROI.
That’s not including the appreciation, which I’m sure is significant. In the Seattle area for that time span it’s a ~90% increase for the median home. Even half of that isn’t too bad, where else are you getting that kind of investment with 25% down?
$100/mo "profit" doesn't even cover maintenance. Also, property taxes continue to increase, etc. The biggest factor is how long ago did you buy the property. Otherwise, a lot of landlords are making money on appreciation when selling (btw we now have a capital gains tax which probably gets expanded in the future).
At one point Biden’s campaign website had a piece about doing away with 1031 exchanges. Is that what you’re referencing with the capital gains tax?
No, WA State legislature enacted a 7% cap gains tax. 1031-exchange is a way to defer taxes in to a new property. But yeah, Biden wants to do away with that.
It appears you most certainly did make money as a landlord. Correct me if I’m wrong:
With the numbers you provided it appears you’re almost $100k into the mortgage, a ROI of 5.75% - that’s assuming you made no profit from rent, just breaking even. A $100/month profit takes that to 6% ROI.
That’s not including the appreciation, which I’m sure is significant. In the Seattle area for that time span it’s a ~90% increase for the median home. Even half of that isn’t too bad, where else are you getting that kind of investment with 25% down?
$100/mo "profit" doesn't even cover maintenance. Also, property taxes continue to increase, etc. The biggest factor is how long ago did you buy the property. Otherwise, a lot of landlords are making money on appreciation when selling (btw we now have a capital gains tax which probably gets expanded in the future).
Do you know what the word profit means?
Nobody smart is being a landlord to make $100 a month. The amount of risk involved...come on dude. I know the industry inside and out and worked in it for many years.
I’m curious which part of what industry you know inside and out. Because I think you’re missing the boat/train/short bus here.
Why the fuck did I write this out? Because I’m an idiot, that’s why. TLDR: OP made a lot of money.
I’ll let you in on a secret: the $100 month profit was a placeholder for my very rough example estimate. It was just the number necessary to bump it up to a 6% annualized ROI when combined with how much of the principal has been paid off.
The $100 a month “profit“ (let’s call it X) is not the only source of gain. Equity (principal + appreciation) is the other. If you owned the house outright, let’s say you inherited it, then $100 a month wouldn’t be very smart. But that’s not the case now, is it?
The mortgage + maintenance expenses + insurance + property tax is being paid by rent. However much of the principal is paid off + appreciation is your equity. The $X/month is what is left over for your cash profit.
We can calculate some better info with the provided numbers. We’ll go extremely conservative so I can’t be accused of being sugary.
Initial expenses: $168,000 down payment, no closing, $30,000 repairs, $27,000 six months of mortgage and expenses prior to renting. Total: $225,000
Income: 86 months of $5400/month rent (91 months total rented) Total income: $464,400 realized (491,400 If paid in full) Note: we’ve been provided $5400 rent starting in October 2013, we’ll assume OP is the patron saint of renters and that number has remained static, although he said he raised it. OP said they’ve been dragging ass for 5 months, not sure what percentage of rent paid dragging ass qualifies under so I just took out 5,400x5.
As you can see I plugged in conservative numbers. I went with the homes assessment as $700,000 for property tax with a 1% tax rate for $7k/year, depending on where it is and assessed value I’d bet that’s close to the current rate and not the starting one in 2013. Homeowners insurance at $3000/year. No HOA was mentioned. I’m assuming no PMI with 25% down, assessed value, and OPs undoubtedly good credit.
That gives us $3,152 as the monthly payment. I’ll add in maintenance at 25% of monthly rent for $4,500 of total expense/month.
At $5,400 revenue/month with $4500 expenses, a profit of $900 month. That’s a bit more than $100 month. $81,900 to date if realized for 91 months.
Five months of unpaid rent is a loss of $22,385 for $59,515 made from rental profit.
Let’s calculate the principal of the loan paid and appreciation profit next.
The amortization table shows us there is $417,375 remaining on the loan. $88,675 of the $506,000 principal has been paid off. That’s your profit before appreciation.
Appreciation: as I looked up earlier, the sale price of the median home in King Co went up ~90% over that time span. Let’s go ultra conservative and cut it in half, 45%. A quick look at homes for sale and their historical sales price says that 45% is incredibly low but I’m using it to prove a point. That would be $303,750 if $675,000 was the sale price in April 2013. (If using 90% the appreciation is $607,500)
Rental profit: $59,515 Principal paid off: $88,675 Appreciation: $303,750 Fed cap gains: -? Total: $451,890
An initial investment of $225,000 created $451,890 of profit over 91 months under a very conservative scenario. That’s about $5,000 for every month of ownership. The increase in home value is responsible for 2/3 of that, but even with that removed it would be ~$1,650 per month.
Note: I don’t have enough info to figure out OPs capital gains tax, and what I read real estate is exempt from Washington’s tax, if it is upheld as constitutional it goes into effect in 2022 and OP is selling now. I didn’t bother with inflation.
This is the only @TheChart that I’m aware of, and it’s the only one that matters. He needs to do real estate markets next, make sure the 2022 recruits get it.
It appears you most certainly did make money as a landlord. Correct me if I’m wrong:
With the numbers you provided it appears you’re almost $100k into the mortgage, a ROI of 5.75% - that’s assuming you made no profit from rent, just breaking even. A $100/month profit takes that to 6% ROI.
That’s not including the appreciation, which I’m sure is significant. In the Seattle area for that time span it’s a ~90% increase for the median home. Even half of that isn’t too bad, where else are you getting that kind of investment with 25% down?
$100/mo "profit" doesn't even cover maintenance. Also, property taxes continue to increase, etc. The biggest factor is how long ago did you buy the property. Otherwise, a lot of landlords are making money on appreciation when selling (btw we now have a capital gains tax which probably gets expanded in the future).
At one point Biden’s campaign website had a piece about doing away with 1031 exchanges. Is that what you’re referencing with the capital gains tax?
No, WA State legislature enacted a 7% cap gains tax. 1031-exchange is a way to defer taxes in to a new property. But yeah, Biden wants to do away with that.
It appears you most certainly did make money as a landlord. Correct me if I’m wrong:
With the numbers you provided it appears you’re almost $100k into the mortgage, a ROI of 5.75% - that’s assuming you made no profit from rent, just breaking even. A $100/month profit takes that to 6% ROI.
That’s not including the appreciation, which I’m sure is significant. In the Seattle area for that time span it’s a ~90% increase for the median home. Even half of that isn’t too bad, where else are you getting that kind of investment with 25% down?
$100/mo "profit" doesn't even cover maintenance. Also, property taxes continue to increase, etc. The biggest factor is how long ago did you buy the property. Otherwise, a lot of landlords are making money on appreciation when selling (btw we now have a capital gains tax which probably gets expanded in the future).
Do you know what the word profit means?
Nobody smart is being a landlord to make $100 a month. The amount of risk involved...come on dude. I know the industry inside and out and worked in it for many years.
I’m curious which part of what industry you know inside and out. Because I think you’re missing the boat/train/short bus here.
Why the fuck did I write this out? Because I’m an idiot, that’s why. TLDR: OP made a lot of money.
I’ll let you in on a secret: the $100 month profit was a placeholder for my very rough example estimate. It was just the number necessary to bump it up to a 6% annualized ROI when combined with how much of the principal has been paid off.
The $100 a month “profit“ (let’s call it X) is not the only source of gain. Equity (principal + appreciation) is the other. If you owned the house outright, let’s say you inherited it, then $100 a month wouldn’t be very smart. But that’s not the case now, is it?
The mortgage + maintenance expenses + insurance + property tax is being paid by rent. However much of the principal is paid off + appreciation is your equity. The $X/month is what is left over for your cash profit.
We can calculate some better info with the provided numbers. We’ll go extremely conservative so I can’t be accused of being sugary.
Initial expenses: $168,000 down payment, no closing, $30,000 repairs, $27,000 six months of mortgage and expenses prior to renting. Total: $225,000
Income: 86 months of $5400/month rent (91 months total rented) Total income: $464,400 realized (491,400 If paid in full) Note: we’ve been provided $5400 rent starting in October 2013, we’ll assume OP is the patron saint of renters and that number has remained static, although he said he raised it. OP said they’ve been dragging ass for 5 months, not sure what percentage of rent paid dragging ass qualifies under so I just took out 5,400x5.
As you can see I plugged in conservative numbers. I went with the homes assessment as $700,000 for property tax with a 1% tax rate for $7k/year, depending on where it is and assessed value I’d bet that’s close to the current rate and not the starting one in 2013. Homeowners insurance at $3000/year. No HOA was mentioned. I’m assuming no PMI with 25% down, assessed value, and OPs undoubtedly good credit.
That gives us $3,152 as the monthly payment. I’ll add in maintenance at 25% of monthly rent for $4,500 of total expense/month.
At $5,400 revenue/month with $4500 expenses, a profit of $900 month. That’s a bit more than $100 month. $81,900 to date if realized for 91 months.
Five months of unpaid rent is a loss of $22,385 for $59,515 made from rental profit.
Let’s calculate the principal of the loan paid and appreciation profit next.
The amortization table shows us there is $417,375 remaining on the loan. $88,675 of the $506,000 principal has been paid off. That’s your profit before appreciation.
Appreciation: as I looked up earlier, the sale price of the median home in King Co went up ~90% over that time span. Let’s go ultra conservative and cut it in half, 45%. A quick look at homes for sale and their historical sales price says that 45% is incredibly low but I’m using it to prove a point. That would be $303,750 if $675,000 was the sale price in April 2013. (If using 90% the appreciation is $607,500)
Rental profit: $59,515 Principal paid off: $88,675 Appreciation: $303,750 Fed cap gains: -? Total: $451,890
An initial investment of $225,000 created $451,890 of profit over 91 months under a very conservative scenario. That’s about $5,000 for every month of ownership. The increase in home value is responsible for 2/3 of that, but even with that removed it would be ~$1,650 per month.
Note: I don’t have enough info to figure out OPs capital gains tax, and what I read real estate is exempt from Washington’s tax, if it is upheld as constitutional it goes into effect in 2022 and OP is selling now. I didn’t bother with inflation.
Yes, that's a different picture than at $100 a month. Also, I said that the only way people are making money off of property they bought recently is when they go to cash out the equity because prices are so high to begin with when entering the market. That's not money in your pocket until you sell, though, and relying on appreciation as a guarantee is not a sound strategy in the long run. The point on the cap gains tax is that, knowing the inside political process, if the tax survives an initiative or referendum process, as well as a court challenge against it being an illegal income tax, it is highly likely that it will be expanded to cover income property in the future. Getting real estate removed was a difficult fight. The math also ignores other political realities which pose risk in the future.
It's pretty tough to find properties with a cap rate high enough to make a property a sound investment right now. Hence Aberdeen being where people are now looking, apparently.
Dang brewer! you went down the rabbit hole. Your numbers are all on point and where they aren't they are low so yes made money past tense. Maybe something more fun would be if we try and find properties where I think you could make money today with similar parameters like minimum down payment, readily available financing, etc.
It appears you most certainly did make money as a landlord. Correct me if I’m wrong:
With the numbers you provided it appears you’re almost $100k into the mortgage, a ROI of 5.75% - that’s assuming you made no profit from rent, just breaking even. A $100/month profit takes that to 6% ROI.
That’s not including the appreciation, which I’m sure is significant. In the Seattle area for that time span it’s a ~90% increase for the median home. Even half of that isn’t too bad, where else are you getting that kind of investment with 25% down?
$100/mo "profit" doesn't even cover maintenance. Also, property taxes continue to increase, etc. The biggest factor is how long ago did you buy the property. Otherwise, a lot of landlords are making money on appreciation when selling (btw we now have a capital gains tax which probably gets expanded in the future).
At one point Biden’s campaign website had a piece about doing away with 1031 exchanges. Is that what you’re referencing with the capital gains tax?
No, WA State legislature enacted a 7% cap gains tax. 1031-exchange is a way to defer taxes in to a new property. But yeah, Biden wants to do away with that.
It appears you most certainly did make money as a landlord. Correct me if I’m wrong:
With the numbers you provided it appears you’re almost $100k into the mortgage, a ROI of 5.75% - that’s assuming you made no profit from rent, just breaking even. A $100/month profit takes that to 6% ROI.
That’s not including the appreciation, which I’m sure is significant. In the Seattle area for that time span it’s a ~90% increase for the median home. Even half of that isn’t too bad, where else are you getting that kind of investment with 25% down?
$100/mo "profit" doesn't even cover maintenance. Also, property taxes continue to increase, etc. The biggest factor is how long ago did you buy the property. Otherwise, a lot of landlords are making money on appreciation when selling (btw we now have a capital gains tax which probably gets expanded in the future).
Do you know what the word profit means?
Nobody smart is being a landlord to make $100 a month. The amount of risk involved...come on dude. I know the industry inside and out and worked in it for many years.
I’m curious which part of what industry you know inside and out. Because I think you’re missing the boat/train/short bus here.
Why the fuck did I write this out? Because I’m an idiot, that’s why. TLDR: OP made a lot of money.
I’ll let you in on a secret: the $100 month profit was a placeholder for my very rough example estimate. It was just the number necessary to bump it up to a 6% annualized ROI when combined with how much of the principal has been paid off.
The $100 a month “profit“ (let’s call it X) is not the only source of gain. Equity (principal + appreciation) is the other. If you owned the house outright, let’s say you inherited it, then $100 a month wouldn’t be very smart. But that’s not the case now, is it?
The mortgage + maintenance expenses + insurance + property tax is being paid by rent. However much of the principal is paid off + appreciation is your equity. The $X/month is what is left over for your cash profit.
We can calculate some better info with the provided numbers. We’ll go extremely conservative so I can’t be accused of being sugary.
Initial expenses: $168,000 down payment, no closing, $30,000 repairs, $27,000 six months of mortgage and expenses prior to renting. Total: $225,000
Income: 86 months of $5400/month rent (91 months total rented) Total income: $464,400 realized (491,400 If paid in full) Note: we’ve been provided $5400 rent starting in October 2013, we’ll assume OP is the patron saint of renters and that number has remained static, although he said he raised it. OP said they’ve been dragging ass for 5 months, not sure what percentage of rent paid dragging ass qualifies under so I just took out 5,400x5.
As you can see I plugged in conservative numbers. I went with the homes assessment as $700,000 for property tax with a 1% tax rate for $7k/year, depending on where it is and assessed value I’d bet that’s close to the current rate and not the starting one in 2013. Homeowners insurance at $3000/year. No HOA was mentioned. I’m assuming no PMI with 25% down, assessed value, and OPs undoubtedly good credit.
That gives us $3,152 as the monthly payment. I’ll add in maintenance at 25% of monthly rent for $4,500 of total expense/month.
At $5,400 revenue/month with $4500 expenses, a profit of $900 month. That’s a bit more than $100 month. $81,900 to date if realized for 91 months.
Five months of unpaid rent is a loss of $22,385 for $59,515 made from rental profit.
Let’s calculate the principal of the loan paid and appreciation profit next.
The amortization table shows us there is $417,375 remaining on the loan. $88,675 of the $506,000 principal has been paid off. That’s your profit before appreciation.
Appreciation: as I looked up earlier, the sale price of the median home in King Co went up ~90% over that time span. Let’s go ultra conservative and cut it in half, 45%. A quick look at homes for sale and their historical sales price says that 45% is incredibly low but I’m using it to prove a point. That would be $303,750 if $675,000 was the sale price in April 2013. (If using 90% the appreciation is $607,500)
Rental profit: $59,515 Principal paid off: $88,675 Appreciation: $303,750 Fed cap gains: -? Total: $451,890
An initial investment of $225,000 created $451,890 of profit over 91 months under a very conservative scenario. That’s about $5,000 for every month of ownership. The increase in home value is responsible for 2/3 of that, but even with that removed it would be ~$1,650 per month.
Note: I don’t have enough info to figure out OPs capital gains tax, and what I read real estate is exempt from Washington’s tax, if it is upheld as constitutional it goes into effect in 2022 and OP is selling now. I didn’t bother with inflation.
Yes, that's a different picture than at $100 a month. Also, I said that the only way people are making money off of property they bought recently is when they go to cash out the equity because prices are so high to begin with when entering the market. That's not money in your pocket until you sell, though, and relying on appreciation as a guarantee is not a sound strategy in the long run. The point on the cap gains tax is that, knowing the inside political process, if the tax survives an initiative or referendum process, as well as a court challenge against it being an illegal income tax, it is highly likely that it will be expanded to cover income property in the future. Getting real estate removed was a difficult fight. The math also ignores other political realities which pose risk in the future.
It's pretty tough to find properties with a cap rate high enough to make a property a sound investment right now. Hence Aberdeen being where people are now looking, apparently.
My apologies if I was being an asshole. It’s my parents fault. They didn’t raise me to be one, quite the opposite, but they are the ones ultimately responsible here. You’re correct in that it’s a different climate now, but all investment (exc the obvious low return bonds, savings etc) comes with inherent risk. My point was to show that there is money to be made from being a landlord on mortgaged property. We see the caveats:
* If OP’s tenants had used the rent/eviction moratorium for a year it wouldn’t be such a pretty picture. - That’s the current problem/question: will not receiving rent payment under governmental aegis continue into the future, or was this a one time thing? * 25% of $675k plus the initial expenses (Tot ~225k) is starting capital that few people have for an investment property.
The question is whether rent will be paid in the future. Appreciation at this rate is not guaranteed, but for the last 30 years housing prices have been growing steadily, even with the crisis, and I don’t foresee that changing.
It is this kind of stuff right here that has me wanting to put my money somewhere else. Are we supposed to have an evection season? Summer time is evection time?
And WTF are they talking about that a landlord would have to automatically renew a term lease? That is the whole reason why I have been signing term leases. So that I can get people out at the end of a term if I want them out.
What comrade Sawant and her proletariat don't see is that mom and pop landlords provide some great elasticity to the rental markets.
I work through plenty of lending scenarios where some boeing engineer kept his first house in Ballard and still rents it for $800 a month because it is paid off and only a two bedroom. You think Blackrock is going to look at it the same way? Hell no, if average rents are up 4.6% they are going to try for 5%.
It is this kind of stuff right here that has me wanting to put my money somewhere else. Are we supposed to have an evection season? Summer time is evection time?
And WTF are they talking about that a landlord would have to automatically renew a term lease? That is the whole reason why I have been signing term leases. So that I can get people out at the end of a term if I want them out.
What comrade Sawant and her proletariat don't see is that mom and pop landlords provide some great elasticity to the rental markets.
I work through plenty of lending scenarios where some boeing engineer kept his first house in Ballard and still rents it for $800 a month because it is paid off and only a two bedroom. You think Blackrock is going to look at it the same way? Hell no, if average rents are up 4.6% they are going to try for 5%.
Two things. First, join RHAWA if you're not already a member as that's the only group in the state that is fighting this stuff in court.
Second, this is the City reacting to the State choosing to uphold a landlord's right to end a contract at its expiration. The new "Just Cause" eviction law still allows landlords to opt-out of auto-renewing, something that the City has been trying to overturn for years. They've lost court cases over this in the past and should in the future if this passes. Also, this is Sawant trying to regain her populist footing as she faces a recall.
Own one rental in Seattle we've had in the family since the 1950's. One thing our jealous, resentful fucking council members, including Sawant, Herbold, Morales, Gonzales, Mosqueda, Juarez (My second favorite Drunk Injun), and the other two nameless, faceless milquetoast eunuchs, will never understand is the risk of handing a million dollar asset over to a stranger for a measly (by comparison) 2500 to 3500 per month. These days, any hole in the wall, broken door or window is a thousand bucks at least. Add to that the 20% or so that goes to property and other taxes, and the risks of owning anything Soviet Seattle quickly cancel out the benefits. Fuck the fact that I rent to people who need housing and my place is in tip-top condition, that doesn't matter. If you own a single family residence at all, anywhere on the West Coast, you are the bourgeoise landed-gentry who greedily steal food from the mouths of babes, all day, every day.
Owning a SFR rental in Seattle? Fuck you, Satan! Your crucifixion is under way.
Kitsap has been good for us, and someone else mentioned JBLM for the same reason...we rent exclusively to military / traveling medical people. We have two currently, rented to a Navy chopper pilot and family, and to an X-Ray tech. If you have trouble with military renters, you can contact their CO, who will straighten it out, so I hear.
Most of the shitty laws found in Seattle have now expanded to the entire state. Rent Control is a real threat to happen at the State Legislature, and if they do overturn the state ban on rent control the legislature will enact a state-wide policy rather than allow cities (like Seattle) to formulate their own rules.
If it was my money I would not invest in this State. I may know too much and be paranoid, though.
Comments
It's pretty tough to find properties with a cap rate high enough to make a property a sound investment right now. Hence Aberdeen being where people are now looking, apparently.
You’re correct in that it’s a different climate now, but all investment (exc the obvious low return bonds, savings etc) comes with inherent risk. My point was to show that there is money to be made from being a landlord on mortgaged property. We see the caveats:
* If OP’s tenants had used the rent/eviction moratorium for a year it wouldn’t be such a pretty picture.
- That’s the current problem/question: will not receiving rent payment under governmental aegis continue into the future, or was this a one time thing?
* 25% of $675k plus the initial expenses (Tot ~225k) is starting capital that few people have for an investment property.
The question is whether rent will be paid in the future. Appreciation at this rate is not guaranteed, but for the last 30 years housing prices have been growing steadily, even with the crisis, and I don’t foresee that changing.
https://www.seattletimes.com/seattle-news/politics/seattle-council-poised-to-ban-many-school-year-and-post-pandemic-evictions-guarantee-lease-renewals/
And WTF are they talking about that a landlord would have to automatically renew a term lease? That is the whole reason why I have been signing term leases. So that I can get people out at the end of a term if I want them out.
What comrade Sawant and her proletariat don't see is that mom and pop landlords provide some great elasticity to the rental markets.
I work through plenty of lending scenarios where some boeing engineer kept his first house in Ballard and still rents it for $800 a month because it is paid off and only a two bedroom. You think Blackrock is going to look at it the same way? Hell no, if average rents are up 4.6% they are going to try for 5%.
Second, this is the City reacting to the State choosing to uphold a landlord's right to end a contract at its expiration. The new "Just Cause" eviction law still allows landlords to opt-out of auto-renewing, something that the City has been trying to overturn for years. They've lost court cases over this in the past and should in the future if this passes. Also, this is Sawant trying to regain her populist footing as she faces a recall.
Don't forget that the City of Seattle is picking up the tab for her legal battle.
https://sccinsight.com/2021/05/03/judge-sets-deadline-to-file-signatures-for-sawant-recall-petition/
Owning a SFR rental in Seattle? Fuck you, Satan! Your crucifixion is under way.
https://www.rhawa.org/blog/king-county-councilmembers-slander-small-landlords
Any advice/info?
If it was my money I would not invest in this State. I may know too much and be paranoid, though.