According to the ?Press Democrat?. The Highest percentage was 42% in Rohnert Park /Cotati.Renters there are either students at Sonoma State or local workers and the prices are running $300k-$400k for decent stuff that will rent for $1,400-$1,500 per month.
I suspect a lot of these investors are planning to manage the properties themselves and that most of them have little or no experience in managing property. If you hire a manager they will charge you the first months rent and 8%-10% of the rent collected each month. A good manager is worth every penny you pay them because things tend to break or go bad at inconvenient times.
If you look at the ROI on these homes and don?t dig too deep, it looks good in comparison to a CD or the stock market. It doesn?t look so good if you do dig a little deeper.
I have managed property and go by the old rule for properties like this, 100x monthly rent. Perhaps as much as 110x monthly rent for a place already hardened as a rental and in perfect shape, in the right location. Hardened? Not much in the way of carpets or rugs, low maintenance but attractive landscaping. I hear people projecting a 15% cash on cash return based on PITI for some properties. Based on my experience, cut that in half. Not a bad return, but not free money. Free money is for big banks, not the rest of us.
About Tom Stone
I am a Broker Associate and Notary public with Creative Property services (CPS) in Sebastopol Ca. My father was an Appraiser and expert witness based in Oakland Ca for many years and I grew up having the basics drilled into me. I enjoy what I do and I am good at it. I managed income property in Oakland for a number of years and was licensed to run a collection agency for more than a decade. I have also worked as a credit manager and as the senior collector at the test center of a Bank . I have been commenting for years at "Calculated Risk" and on other Real estate Blogs including the defunct "Sonoma Housing Bubble" Blog. The best job title I ever had was "Chief Garbler". My Email Address is "StoneForHomes@Gmail.com" and my cell # is (707) 364-2477, please don't call before 7 AM or after 8 PM unless we have a deal in progress.
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