Investors Pile Into Housing, This Time as Landlords - WSJ.com

Is this a good investment?  If you rent out a home for $2600 per month, how much should you pay for it?  Well that depends on what kind of return you want on your money.  As a rule of thumb you can only net 10 months out of 12, the remaining two easily gobbled up by taxes, insurance,and maintenance.  $26,000 per year at a 7% return rate would value the property at 26,000/.07 or $371,429.  And that’s with the headache of managing it yourself.  Say you have to pay someone a modest amount of 15% of the rentals, then your return drops down considerably to 5.95%.  The same house that cost $371,429 now is only worth $315,714 if you still want to make 7% on your money.  

By NICK TIMIRAOS Michael Czerwonka for The Wall Street Journal Jeff Pintars company now owns or manages 1,700 homes in Southern California. Above, he stands in one of his properties in Anaheim Hills, Calif.LAKE FOREST, Calif.—Jeff Pintar had buyers remorse as he purchased 12 foreclosed homes in five Southern California counties on a single day. His regret: that he didnt buy more homes a year earlier.”Things have turned around faster than anyone anticipated,” said Mr. Pintar, who first began buying properties here four years ago and now owns or manages 1,700 homes, which he rents out for between $1,000 and $3,800 a month. Here in Orange County, nearly every home listed for less than $400,000 “is being pursued by institutional investor capital,” he said.U.S. housing recoveries almost always have been ignited by rising demand from families and individuals looking for a place to live. This recovery is different. Investors—including some big Wall Street players—are leading the way, say industry executives and analysts. Their role is noteworthy given that flippers and speculators were blamed for helping to inflate the housing bubble of the past decade.

via Investors Pile Into Housing, This Time as Landlords – WSJ.com.