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Old 03-09-2009, 10:02 AM
 
Location: Fort Worth and Las Vegas
255 posts, read 485,429 times
Reputation: 73

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Quote:
Originally Posted by airics View Post
so if i understand what you are saying is.. if you can buy a home for $144,000 and then rent it for $1200 (1200x120=144k) than now is the best time to buy because at this price it is extremely doable! my source for the 1200 per month, is my own rental house..
Watch the numerator and denominator though. If the rent drops by even 50 to 100 dollars which it has b/c there are so many rentals available, the price will then drop a corresponding amount. So if 1200 becomes 1100 then price should drop from $120,000 to $110,000 for the same house assuming a 100 times rent metric. Of course, consider HOA and taxes also - to be safe, use a 100 times rent to make sure you will cash flow even with higher HOA's.
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Old 03-09-2009, 10:50 AM
 
Location: NW Las Vegas - Lone Mountain
15,756 posts, read 32,508,894 times
Reputation: 2661
Quote:
Originally Posted by rpachigo View Post
Watch the numerator and denominator though. If the rent drops by even 50 to 100 dollars which it has b/c there are so many rentals available, the price will then drop a corresponding amount. So if 1200 becomes 1100 then price should drop from $120,000 to $110,000 for the same house assuming a 100 times rent metric. Of course, consider HOA and taxes also - to be safe, use a 100 times rent to make sure you will cash flow even with higher HOA's.

Lease listings are pretty much holding at about the same levels as the past four years. The average is up 2008 over 2007. Initial 2009 looks similar.

There are more lease listings in January/February than in past years but roughly the same percentage of increased sales. The ratio of leased to listed was higher in 2008 than earlier years.

This would indicate more homes available offset by higher demand. That would appear to fit the existing financial scenario.

The one percent rule proposed is overly simple. It will work but would probably block many lucrative rental opportunities. You do the calculation and then decide. It is not terribly difficult.

Note for instance that Nevada taxes are quite low. Maybe a third of those in say Texas. So Nevada picks up more than 0.1% on that issue alone.

Do the sums. Then decide
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Old 03-09-2009, 11:34 AM
 
Location: Fort Worth and Las Vegas
255 posts, read 485,429 times
Reputation: 73
Quote:
Originally Posted by olecapt View Post
Lease listings are pretty much holding at about the same levels as the past four years. The average is up 2008 over 2007. Initial 2009 looks similar.

There are more lease listings in January/February than in past years but roughly the same percentage of increased sales. The ratio of leased to listed was higher in 2008 than earlier years.

This would indicate more homes available offset by higher demand. That would appear to fit the existing financial scenario.

The one percent rule proposed is overly simple. It will work but would probably block many lucrative rental opportunities. You do the calculation and then decide. It is not terribly difficult.

Note for instance that Nevada taxes are quite low. Maybe a third of those in say Texas. So Nevada picks up more than 0.1% on that issue alone.

Do the sums. Then decide
Again I repeat be safe. What may seem lucrative could end up being a money pit if not sticking with conservative estimation of rent, taxes, HOA etc. Also maintenance and unoccupied time eat into any potential profits. Even with the 1% rule, cap. rate may only be 8% or better than a cd but not much better than a muni. All things to keep in mind.
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Old 03-09-2009, 11:46 AM
 
Location: Here and there, you decide.
11,583 posts, read 22,692,912 times
Reputation: 3883
currently i'm breaking even on my rental, but i bought in the high of 06 and put a good chunk down.. the same house is 110k Less than what i paid for it.. so i figured at a 130k buy, 20% down, 105k loan and 1200 rent (my area has not gone down for rent), i would be ahead compared to having the downpayment in the bank as a cd earning 3.5%
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Old 03-09-2009, 11:52 AM
 
Location: NW Las Vegas - Lone Mountain
15,756 posts, read 32,508,894 times
Reputation: 2661
Quote:
Originally Posted by rpachigo View Post
Again I repeat be safe. What may seem lucrative could end up being a money pit if not sticking with conservative estimation of rent, taxes, HOA etc. Also maintenance and unoccupied time eat into any potential profits. Even with the 1% rule, cap. rate may only be 8% or better than a cd but not much better than a muni. All things to keep in mind.
This is a discussion of the threshold. Every investor should have one. But the one proposed is too simplistic. It for instances would favor a high tax investment over a low tax one. Cap rate or return on cash would provide a more balanced view.

And what you are trying to do is also a big variable. Do you want a straight long term investment? Or an appreciation play as well? Liquidity a concern?

It is simply too complex for simple rules.

Any investment can turn into a money pit. LV real estate at this point in the cycle is likely safer than most of the alternatives that pay any where near as well.

Best sales point I know for LV RE is a Dow at 6800.

Got a client who just jumped in after realizing he was picking up 2.5% on big CDs. Note that he has done very well the last year compared to the stock market. He is local and able to manage his own property. Barring a melt down he will pick up about 9 or 10% on the acquisitions...plus tax advantages. And if it ever starts appreciating I think he picked quite well.
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Old 03-09-2009, 11:56 AM
 
Location: Fort Worth and Las Vegas
255 posts, read 485,429 times
Reputation: 73
Quote:
Originally Posted by airics View Post
currently i'm breaking even on my rental, but i bought in the high of 06 and put a good chunk down.. the same house is 110k Less than what i paid for it.. so i figured at a 130k buy, 20% down, 105k loan and 1200 rent (my area has not gone down for rent), i would be ahead compared to having the downpayment in the bank as a cd earning 3.5%
As an investor, I'm putting 25% down minimum to get best interest rates (they're still high as an investor) and doing 15 year fixed and I am clearing a little for a lot of stress. If I looked at it like a cd, I've bought two outright and they are "paying" me 8% not great but ok I guess.
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Old 03-09-2009, 11:58 AM
 
Location: Here and there, you decide.
11,583 posts, read 22,692,912 times
Reputation: 3883
so the homes are paying you 8% vs your down payment in a bank at a 3.5% cd rate correct?
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Old 03-09-2009, 12:00 PM
 
Location: Here and there, you decide.
11,583 posts, read 22,692,912 times
Reputation: 3883
also, why 15yr vs 30yr
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Old 03-09-2009, 12:04 PM
 
Location: Fort Worth and Las Vegas
255 posts, read 485,429 times
Reputation: 73
Quote:
Originally Posted by airics View Post
so the homes are paying you 8% vs your down payment in a bank at a 3.5% cd rate correct?
I paid cash on two properties. Rent minus HOA, taxes, maintenance, insurance, 5% unoccupied rate, property management fees returns me about 8%. So if I invested that money in a cd, I'd be getting 3.5% or a muni about 5.5 to 6. Also I'm doing 15 year b/c of a better APR and less interest to pay to the bank.
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Old 03-09-2009, 12:07 PM
 
Location: Here and there, you decide.
11,583 posts, read 22,692,912 times
Reputation: 3883
if i can ask, did you buy condo or sfr? im assuming sfr
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