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where i live HOA is usually no more than 100 a year. Also, property insurance where I live is no more than 1,000 a year.
I already talked to my realtor and they say its a good investment and a lot of people are doing that from out of state.
As long as I put down 20% my monthly (including home warranty, hoa, insurance, tax) no more than 700 a month.
Most rentals go about 700 - 900 a month for a 1 bedroom.
My mother actually bought a town home, rented it out, and in 10 years sold it for equity and got a very good amount back. Not sure why so many nay-sayers and doubters
You are asking a question you have already made up your mind about, so why did you even bother making this thread?
What because you didn't get an overwhelming, oh yeah that is great, go for it, all of a sudden we are a bunch of hating nay sayers?
If you just want someone to agree with you then talk to your realtor. After all they only make money when they find a buyer or seller, so think about that.
I have my real estate lisence and mortgage loan originator lisence. The numbers you are giving don't add up to be a good investment unless you think the property values are going to go way up. I think you will be lucky to break even from the rental. I also don't believe a condo's monthly HOA is around $8 month, it's near impossible. I've never in my entire life have seen a condo HOA even close to that amount.
It sounds like a lousy investment. The margins would be too slim. At best, he generates $250/mo in cash flow, so only $3k per year. Then his profits are taxed. It would take him like 10 years to earn back his original investment of $20k. Simply put, the risk is not worth the reward IMO. He'd have better odds throwing his money into the stock market.
These rental apartments are good investments for large cash buyers and corporations who can snag up multiple units and work off of volume. Not for the little guy who needs an 80/20 loan.
It sounds like a lousy investment. The margins would be too slim. At best, he generates $250/mo in cash flow, so only $3k per year. Then his profits are taxed. It would take him like 10 years to earn back his original investment of $20k. Simply put, the risk is not worth the reward IMO. He'd have better odds throwing his money into the stock market.
These rental apartments are good investments for large cash buyers and corporations who can snag up multiple units and work off of volume. Not for the little guy who needs an 80/20 loan.
ah good point! Got me thinking! So, stock markets would be better option for something around 20k - 40k? The thing is I am able to save about 20 - 40k a year (depends on repairs ill need in the house and cars) and not sure what to do with it. My mom said to get into apartments, but Miami, FL was a different story since in 10 years, an apartment went from 40k to 200k. Colorado is not that way.....at least not that we can tell. The rent market is strong though due to people moving in and out fast due to military
ah good point! Got me thinking! So, stock markets would be better option for something around 20k - 40k? The thing is I am able to save about 20 - 40k a year (depends on repairs ill need in the house and cars) and not sure what to do with it. My mom said to get into apartments, but Miami, FL was a different story since in 10 years, an apartment went from 40k to 200k. Colorado is not that way.....at least not that we can tell. The rent market is strong though due to people moving in and out fast due to military
About the stock market, I said that tongue-in-cheek. IMO your investment would only make sense if the rental income generated was a significantly higher amount than your monthly costs. If you lived in a high growth area where values were expected to rise 3-fold in 30 years, then your strategy would pay off. But if values remain stagnant or grow only modestly, you would need better cash flow from your rental income.
Think about what you're trying to do. You are risking $100k on a mortgage plus interest, insurance, taxes, HOA, so really closer to $200k over the life of the loan, on a property that may only be worth $100k in the future. At $800/mo rent, you barely break even on your investment during the life of the loan. Only 30+ years out does your investment become a profitable endeavor. So you are really banking on the equity, not the rental income, as your source of profit.
In 30 years, you walk away with a $100k equity asset which hopefully appreciates during that time. There is no guarantee since apartments depreciate at a higher rate than single family homes. A $100k apartment today could be a tear-down 30 years from now. All $300k of the rental income you generated is gone because you used it to pay the mortgage.
So you spent 30 years in order to generate a $100k gross profit, an annualized return of about $3300. By then, 3300 is only worth half of what it is today because of inflation. So you did all of this just to earn the same amount of money you would have had in 2016-17 had you never invested it into this apartment to begin with.
Last edited by Nolefan34; 05-09-2016 at 09:52 PM..
The only person in this thread who seems to have had any experience investing in real estate knows about New York City real estate. That is probably as useful to someone investing in Colorado(?) real estate as someone who is an expert in Bogotá real estate or an expert in building surf boards in Hawaii. Even in a medium-sized city, like Nashville, or Peoria, I would bet that there are local areas that require local knowledge. It's sure true for Dayton, Phoenix and Albuquerque.
There are probably a whole lot more people in the US who got rich off of real estate than by investing in stocks.
I would think the best way to learn about investing in real estate is to put up a bunch of your own money as a junior partner with someone you trust and treat it like a full time job. Until you have some skin in the game, you know nothing.
Ooops. Change "some" to "a lot" in the sentence above.
It sounds like a lousy investment. The margins would be too slim. At best, he generates $250/mo in cash flow, so only $3k per year. Then his profits are taxed. It would take him like 10 years to earn back his original investment of $20k. Simply put, the risk is not worth the reward IMO. He'd have better odds throwing his money into the stock market.
These rental apartments are good investments for large cash buyers and corporations who can snag up multiple units and work off of volume. Not for the little guy who needs an 80/20 loan.
3k/20k = 15% ROI
Add in principal return on that and you're up to a 24% ROI on day 1.
Of course, costs will impact that but assuming: 80% occupancy rate you're still at a 19% ROI.
Pretty good numbers. Don't forget depending on income (under $150k/yr IIRC) you can also write off the depreciation on the property and appliances, etc.
Real estate is a long term game. If it takes this guy 10 years to buy a bunch, so what, do it when you're young and you've just bought yourself a pension courtesy of the renters.
Also, it's only a theoretical cash flow. The original numbers assume 100% occupancy from the get-go. They also assume that there will never ever be any maintenance expenses.
i love buying rent stabilized apartments . not rent controlled which is something different .
we made a lot of money buying stabilized apartments in a co-op building by central park . then buying out as many original stabilized leases as we can and selling the apartments .
in real estate that is the only thing that interests me .
Also, it's only a theoretical cash flow. The original numbers assume 100% occupancy from the get-go. They also assume that there will never ever be any maintenance expenses.
I assume things won't go so perfectly.
You'll see I actually posted an 80% rate which is pretty standard in the industry. Why would you purposely ignore that part of my post? It makes your point seem very weak.
Mx can vary widely by location and area of the country, and can also vary by the skill or handy work of the owner. Replacing a bad light switch might cost someone who knows how to do it $0.40, or it could cost the hands off landlord $150 for an electrician call. Some apartments might have central AC and some might have a renter supplied window unit with no cost to the landlord. Lots of variables.
You'll see I actually posted an 80% rate which is pretty standard in the industry. Why would you purposely ignore that part of my post? It makes your point seem very weak.
Sorry. That wasn't my intent to ignore your post.
What I was quoting was that " cash flow != ROI ". In any case, you quoted the OP's original numbers of
3k/20k.
If you are assuming 80% occupancy, then the formula would be (3k * 80%) / 20k = 2.4k / 20k = 12%. That's still an assumed cash flow and again cash flow != ROI.
Quote:
Originally Posted by wheelsup
Mx can vary widely by location and area of the country, and can also vary by the skill or handy work of the owner. Replacing a bad light switch might cost someone who knows how to do it $0.40, or it could cost the hands off landlord $150 for an electrician call. Some apartments might have central AC and some might have a renter supplied window unit with no cost to the landlord. Lots of variables.
This is a perfect couple of examples of costs that affect ROI. Rents come in fairly regularly, but costs are like cockroaches.
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