I am a landlord with seven years of experience buying 3- or 4-bedroom homes and signing leases with tenants on a per-room-basis. I offer rooms for $1,250 in Hayward, California, which leads to $3,750 or $5,000 in rental revenue per month for a $700,000 to $850,000 home, which covers more than a mortgage interest expense after depreciation with a 20% downpayment.
At today's 3% interest rate for 30-year mortgages, one could take an $800,000 loan―a loan that requires a 20% down payment―for a 4-bedroom townhome for a $4,000 monthly mortgage. We could then rent each room for $1,350, which will generate $5,400 in monthly revenue. Assuming a 3% 30-year mortgage, "COGS"―which includes mortgage interest expense, escrow, HOA fees, and utilities―add up to ($3,934) a month, which would lead to a $1,466 monthly profit with a 27.2% Gross Margin.
Assuming a depreciation amount equal to 70% of the property purchase price, the company can claim a monthly ($2,125) depreciation expense tax shield. The company could then decide what to do with an equivalent 8.8% return on equity for 20% downpayment funds for the first year, plus tax refunds due to the net income loss after depreciation, plus increases in home equity via property value increases averaging 4% to 6% per year in the San Francisco Bay Area.
I need capital investments to have the downpayment to purchase these homes to get the best interest rates without mortgage insurance. Please contact me to discuss how we can proceed! I am looking forward to hearing from you.
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