Are Homes To Expensive To Make Rentals?

With the rapid increase in sale prices over the last 6 months, has the market over priced itself for rental properties? Even though prices have gone up the cost of financing is still historically low. What most investors don’t realize is that owning a rental property is a numbers game. As long as the monthly rent you receive from tenants is more that the monthly mortgage payment, property taxes, insurance & management fee’s the property will still cash flow.

Even though prices have shot up the lower interest rates will keep your monthly payment roughly the same as it would have been a few years ago when there were lower home prices and higher interest rates. What we have seen lately is that the rental rates have risen as well. So some properties that were renting for $1,200 per month are now renting for $1,300-$1,500 per month.

These rise in rental rates should offset the increased prices that current homes are selling for. So the answer in my opinion is yes, now is just as good of time as any to purchase vacation homes and other¬†rental properties for your portfolio. It’s more about numbers that matter on the deal more than the purchase price you pay for the deal. You will just need to be ready for property management and other tasks that the rental property ownership entail.