Serious contemplation

[Dwish]

serisoulsy looking at a second (larger) rental property. The property consists of 8 1000 sq ft three bedrooms. The price is in the area of 600K and the expenses are about 40 per yr. The property is in great shape, however I AM WORRIED ABOUT LOSSING A TENANT BEING THAT WITH ONLY 8, EVERY RENTAL IS NEAR VITAL.

ANY SUGGESTIONS?

[GeorgeW]

I think we might need a tad more information... At least I would before making a decision. I base my real estate choices on ROI - and if the property does not show a good ROI (After factoring in the vacancy rate and a metric for "unforseen factors") Then I will make a purchase.

The most important thing about buying a rental property (if you are after ROI and not capital gains as I am) is that you can maintain that cash flow. If you lost a tennant, how badly would that hurt your ROI? How long could you "survive" without that tennant? Not knowing what the rental rates are for each place, I can't calculate what the estimated ROI would be - without hard numbers I find it impossible to answer your question.

My first bit of advice would be to get your ROI and vacancy rate figured out. Make absolutely certain your ROI is a positive number - if it is negative, that is not good - unless you are after capital gains... Which might be difficult given the current market changes.

[kensmith]

With 8 units a good property should be able to handle one vacancy, if not the price is most likely to high. It would only be a 12.5% vacancy factor and that would be pretty conservative IMO. So if you need all 8 units rented to make the mortgage each month I personally wouldn't consider it. Unless there was some other major upside such as selling as condos for a big payday or you know the rents are far below market. More info would most likely support this, but as George said you really haven't provided enough to give an accurate opinion.