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Old 04-02-2020, 01:34 PM
nonactuarialactuary nonactuarialactuary is offline
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Join Date: May 2008
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Originally Posted by somewhere View Post
If it really needs hundreds of thousands worth of work, would it be able to fetch $2000 rent per month per unit? That is well above the average rent for the neighborhood. 3 bed 2 baths is the profile of the units.
Run some sensitivity tests. What's the average for the area for comparable units? If the current tenants move out, you might be forced to take the average rent rather than getting the premium you're getting now. Also, consider the various risks involved. What if your tenants lose their jobs leaving you with zero rental income? Eviction is a drawn-out messy process in normal times, and many states have prohibited evictions until the public health crisis is over. It's not an unrealistic scenario, especially in the short term. In the worst case scenario where you'll be going months at a time with zero rental income, can you cover the holding costs and still have enough left over for potential maintenance costs? How do you think the neighborhood will fare in an extended shut down? Will people be looking to leave for wide open spaces after this is all over?

Long story short, consider the $72K/year rental income as a best case scenario and work backwards from there.
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