Let’s start with a basic premise: Single-family homes will rent toward the high side and higher of the local rent range. Side-by-side doubles will rent for less; duplexes (units above and below each other) will rent for even less, and three to four units in a single two-story building will often rent for less still. Single-family homes obviously should cost more for the owner/investor to purchase on a per-unit basis than a multiunit building.

A Case Study

When I consider a property to purchase, my goal is to provide good shelter for a price that is affordable for a substantial portion of the population. You can determine the investment value of a property based on return on investment or ROI. Let’s look at the ROI of a property I own in Springfield, Ohio.

Single Family Home
Potential Rent Monthly Annually
Unit 1 $565.00 $6,780.00
Total $565.00 $6,780.00
Vacancy Reserve 10% -$56.50 -$678.00
Repair Reserve 20% -$113.00 -$1,356.00
Insurance: -$50.00 -$600.00
Property Taxes: -$45.00 -$540.00
Water $0.00 $0.00
Mowing/Average Over 12 Months $0.00 $0.00
Professional Management 10% -$56.50 -$678.00
Total Expenses -$321.00 -$3,852.00
Net Profit $244.00 $2,928.00
Estimated Appreciation: 0.00%

This property has averaged a 17% or higher return every year that I have owned it. Only in fairly depressed markets would most investors be able to buy properties that perform this well. When considering any property to buy in Springfield, my goal is to achieve 20% ROI, but I am happy with an average of 15% to 17% after all expenses.

Estimate the potential rent price.

When evaluating a property to purchase, you must…