I just rented out one of my SFRs today for $2,150. Last August, I rented it out for $1,875. This time around, I rented it in 6 days. Last year it took 20 days and two price cuts.
According to Zillow, the current full market rent is about $2,500, which is up from $2,000 last June.
The rent I just charged this new tenant is about $250 below what I consider to be full market rent of $2,400. She feels like she got a great deal and I got a great tenant. I am looking for her to stay 2-3 years and will increase the rent annually about 2.5%.
Okay, so what does this mean to me as an investor? Let’s take a quick look at the numbers.
First, what is the capitalization rate based on my purchase price?
6/2024 purchase price: $337,000
Current rent: $2,150
Current rental income (less taxes and insurance): $1,900/mo
My cap rate: 6.77%
Determining fair market value
So, let’s determine fair market value. I ask, what would other potential investors pay for this property? Given the rising rents, what would a potential homeowner pay rather than to continue renting somewhere else?
Historic cap rate of property: 5.8%
Full market rent: $2,400
Full market rental income: $2,150
Full market value based on historic cap rate: $445,000
That’s a lot of appreciation, and it was all made possible, because of rising rents. As an SFR investor, I would be willing to pay as much as $400k for the house, depending on its condition.
By the way, the current market value is $390k and climbing fast. Full market value at the time I bought was about $350k. The house price will eventually merge with the rent potential. I peg the price at $430k. It may take another selling season to reach that level, but it will.
The full market value based on my analysis is up about $80,000 since last June. The price in the marketplace will shortly meet my conclusion. That 23% increase in market value is all due to rents.
I have another similar SFR situation next month. Similar numbers and similar appreciation.
As I get older, my investment objectives change
For me, I prefer buying properties in Class B to A- areas. When I started out 25 years ago, I was willing to go down to Class C- to C properties to capture extra cash flow.
The rental properties that interest me are always in demand. They are usually situated on at least a quarter acre lot and provide owners with an excellent store of value along with more predictable price appreciation due to limited supply and high demand from prospective tenants. As I get older, I prefer better quality properties. I am willing to trade off some rental income in return for superior appreciation potential.
Each investor needs to figure out his or her niche and particular set of circumstances. As my levels of equity have grown over the years, my choices available have also increased. Investors who are starting out will have less options and will be more reliant on developing higher levels of cash flow versus the underlying market values of the properties. In other words, newer investors should seek properties with higher capitalization rates.
Gold futures touched 3201 after the Trump tariff announcement. Quickly fell back.
Congrats! You called it!
Stone, what is your analysis of Trumps tariff plans? It seems this could cause a rapid reordering of the world order.
It could. Unfortunately, for the sake of the US, the country can’t continue running these massive trade deficits anymore. This should have been done back 30 years ago.
Q3 2027
The reason why Trump is reordering the system is probably that the USA trade deficits and budget deficits are no longer sustainable and those up top know it. That was the reason for DOGE too. The USA is broke.
Rumors has it that Musk is quitting DOGE. So much for draining the swamp. I guess deficit spending will be up, up and away like a rocket straight into space.
https://www.cnbc.com/2025/04/02/tesla-shares-rise-on-unconfirmed-report-elon-musk-could-be-leaving-doge-post-soon.html
It is obvious that Musk is thinking dollars and sense for himself as it is costing him much more to head up DOGE than he is gaining. His company is tanking meanwhile. DOGE is also costing Trump political goodwill so I would not be surprised that Trump is pulling away from this. Face it guys, the swamp will never get drained until Putin vaporizes this with nukes. The swamp has a way of sucking in everybody. The good news out of this is that asset owners will ultimately be the winners until the force majeure.
Seems like the leftist have won again as Elon is folding to the protests against his business.
I wouldn’t read too much into this stuff. Trump has actually done quite a bit in the short amount of time he’s been back in. It’s going to be difficult to unwind a lot of his stuff to go back to the way it was during Biden.
Biden was overboard loving the black people. The only people who love black people are black people. Most people I talk to can’t stand them. I’m talking Asians and Hispanics as well. They laugh at them.
Heck, blacks don’t even respect each other. They always put their fellow black down and they call each other niggers.
To all those renters out there, keep in mind that Tuesdays are Soylent Green days. Get your rations.
Heaven help those who don’t own a property and are smart enough to know that they should own assets.
I know I come across as finding multiculturalism and miscegenation as disgusting, which of course is forbidden in the Bible, but it’s very profitable to landlords. I cannot believe the amount of money I make from broken families, broken hopes and dreams, depression and despair, hopelessness, self-absorption, and victimhood.
The more disgusting and decrepit society becomes, the more money I make. It’s that simple.
The whole scene outlined in Sodom with the narrative between the angels and Lot discusses the obsession with strange flesh. All that is about are the white folk in the city who are banging all the foreigners and are obsessing with same-sex sex. What do you think strange flesh means? It’s rather obvious, or it was before the synagogue took over the schools and media.
People’s obsessions with strange flesh are instrumental in driving up rents in a very profound manner. It’s all so predictable.
This is exactly why the SoS promote obsession with strange flesh, multiculturalism, and promiscuous sex. This all benefits those up top as they prey on those who commit these sins.
Debauchery is a huge moneymaker for those up top.
Jude 1 : 7. Strange flesh, a direct manifestation of satan! A corrupt and perverted mind.
A classic movie!
ADP comes in hot
ADP Nonfarm Employment Change (Mar)
Act: 155K Cons: 118K Prev: 84K
Looking to buy a rental hopefully in the next year or two. If it wasn’t for your blog I fear we wouldn’t have had the courage to pull the trigger on the property we have now. Almost 3 years in now. It needed alot of work and still has a ways to go but once I am done the last remaining repairs and renos I think it’s probably appreciate 50 percent judging by the action in the local market. Thx Stone!
“superior appreciation potential” in otherwords less stress and worry about damage and evictions. lol I’ve seen the horror stories, leaving the bathtub water on, broken windows, busted walls, litter and animal feces thruout. Do you have something in the contract that allows you to perform and inspection once a month?
The tenants are only as good as the landlord.
This tenant is in her late 40s, coming out a divorce with three children, blonde hair blue eyes, high school Spanish teacher, finishing up her PhD program, makes 90k a year. Her previous landlord, a Realtor, is selling and she gave her a great recommendation.