Let’s explore the rental market in St. John’s! If you’re an investor and eager to learn about new opportunities and how to make smart moves, you’re in the right place!
In this two-part series, I will cover everything you need to know about investing in rental properties in St. John’s. In this first part of our series, I will provide you with a high-level overview of the rental market in St. John’s. I will also outline six key factors you should consider when selecting a rental property. And, in part two I will show you how to analyze a deal effectively.
Overview of Rental Market in St. John's
First things first, let’s talk about the current demand for rentals in St. John’s. It’s sky-high! The limited availability of rental properties has led to a steady increase in home rental prices over the past couple of years. So, if you’re considering entering the rental market, now is definitely a great time!
However, I do want to stress to you that when it comes to real estate investing, it’s essential to adopt a long-term perspective, unless, of course, you’re into flipping houses. While positive cash flow is important, the greatest returns on your investments are typically realized over time as you stay in the market and build equity in your properties.
And, before we go too far, I want you to know that for the purpose of this video I will be solely focused on the residential real estate market, excluding commercial investments or multi-family apartment complexes. So, we will primarily be discussing the two main types of residential investment properties found in St. John’s: 2-apartment homes and single family homes.
2-Apartment Home Rentals in St. John's
Let’s look at 2-apartment homes first. These homes generate rental income from both units, providing a safety net even if one unit is unoccupied. For first-time home buyers, purchasing a home with a rental unit is an excellent entry point into real estate investing, allowing you to experience the responsibilities of a landlord firsthand. I previously wrote a full blog on this topic, here is the link.
Now, let’s talk numbers. The average sale price of a two-apartment home in the St. John’s Metro area last month was $344,000. Based on my experience, you can typically find a decent two-apartment home for around $325,000. However, as you go below the $300,000 mark I tend to find that the quality begins to decline, either requiring additional work or the home is located in a less desirable area for tenants, which may impact potential rental amounts.
Single Family Home Rentals in St. John's
The second type of investment property is a single-family home, which can include detached, semi-detached and attached homes. Opting for this type of property offers the advantage of potentially finding an investment property at a lower price compared to 2-apartment homes. Plus, depending on the number of bedrooms, you can still charge a reasonable rent, especially if the property is located in the university area, where students often share housing expenses. It is possible for this scenario to result in a higher positive cash flow, and the best part is, you don’t have to contend with disputes between upstairs and downstairs tenants. Which would be a win-win situation!
6 Key Factors to Selecting a Rental Property in St. John's
Factor #1: Home Quality
Well-maintained and attractive homes often attract better tenants who are more likely to take care of the property and pay rent on time. Remember, a well-kept property leads to satisfied tenants and less hassle for you.
Factor #2: Location
Properties near the university may command higher rent from students, but keep in mind that you can expect more turnover. On the other hand, properties in family-friendly neighborhoods near schools may have slightly lower rent, but tenants are more likely to be long-term, resulting in less turnover. Consider your target market and choose wisely.
Factor #3: Tax & Insurance
Don’t forget to include these costs in your calculations. Municipal tax is determined by the city based on the current assessed value multiplied by the mil rate. And, a water tax is added for each unit on the property. Insurance premiums may vary based on factors like the property’s age, heating and plumbing systems, and roof condition. And here’s a pro-tip: require tenants to have tenant insurance, which not only provides coverage for their belongings but also helps keep your premiums down.
Factor #4: Grass & Snow
Don’t forget to budget for seasonal outdoor maintenance. Typically, tenants are responsible for their own snow removal, as defined in the rental agreement. Cutting the grass in the front and backyard is usually the responsibility of the property owner, but you can make arrangements with tenants for this task as well.
Factor #5: General Maintenance
Repairs and upkeep are inevitable. It’s advisable to have a home inspection conducted at the time of purchase to assess the current condition of the house. This will help you plan and budget for future expenses, such as major items like the roof, windows, and water heater. Stay proactive and save yourself from unexpected surprises down the road.
Factor #6: Rent Amounts
Setting a fair rent increases the likelihood of attracting long-term tenants and reduces turnover. Sometimes, charging slightly less than the maximum amount you could potentially get can be beneficial in attracting reliable, long-term renters. Remember, a stable and consistent income stream is key to your success as a real estate investor.
Finding Success in the Rental Market in St. John's
Now that you’re equipped with the knowledge of what to consider when selecting a rental property, it’s time to ensure that the numbers work. In my blog next week, I will walk through an example to demonstrate the potential earnings from purchasing a rental property. If you’re like me and like numbers, you will find this part exciting.
Do you need help finding a rental Property to purchase in st. john's?
We should talk! Everybody’s situation is a little bit different. I will work with you to ensure you have all the information you need to make smart investment decisions, including detailed property history and up to date statistics.
TEXT ME at 709-770-5565 or CLICK HERE to schedule a meeting.