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In your example, wouldn't a sale price of $150k when paying a six percent commission be a loss of $9k plus closing fees and concessions? I see no "actual profit" and calculate a loss. The initial investment $$s coming back are not profit, but equity.
If this example is a personal residence (your home) then with the fact that you did not pay rent for 5 years and you had some tax benefits (mort. interest, etc.), you did OK.
If this was an investment property it would have needed a strong positive cashflow to be called a good investment.
-Mark
Hi Mark,
In my example, it is a personal residence. I know many people, myself included, who were priced out of the MA real estate market earlier this decade, except for "fixers". Umm...those of us who refused to take ARMs, that is.
Rents at that time were comparable to the cost of a fixer mortgage. In my case, which is only roughly approximate to the example (sake of round numbers), I consider myself lucky in this market to have broken even, more or less, considering that as much of the work that didn't need to be done by professionals was "DIY sweat equity", and that I also count the privacy and satisfaction of owning my own home as part of the equation (and try not to think about the potential profits I might have earned by renting and putting the savings into stocks/bonds, etc. instead).
Some of my colleagues at work vastly overspent on renovations and are now "in the hole" if they choose to sell. Others took out equity for new cars, expensive furniture, electronics, etc. and are hopelessly in debt. I never refi for cash out. It's always for the exact amount owed w/no closing costs --- until I find the location I don't plan to move from for enough years to make closing costs recoverable.
In my example, it is a personal residence. I know many people, myself included, who were priced out of the MA real estate market earlier this decade, except for "fixers". Umm...those of us who refused to take ARMs, that is.
Rents at that time were comparable to the cost of a fixer mortgage. In my case, which is only roughly approximate to the example (sake of round numbers), I consider myself lucky in this market to have broken even, more or less, considering that as much of the work that didn't need to be done by professionals was "DIY sweat equity", and that I also count the privacy and satisfaction of owning my own home as part of the equation (and try not to think about the potential profits I might have earned by renting and putting the savings into stocks/bonds, etc. instead).
Some of my colleagues at work vastly overspent on renovations and are now "in the hole" if they choose to sell. Others took out equity for new cars, expensive furniture, electronics, etc. and are hopelessly in debt. I never refi for cash out. It's always for the exact amount owed w/no closing costs --- until I find the location I don't plan to move from for enough years to make closing costs recoverable.
We are alot alike. I am a DIYer as well. I manage rental property for others and had a goal after college in the early '90s to buy and fix up a modest single family house every 2-3 years and try to keep them and rent them out. It took a while to get the $$ together but we bought our first house in '97 (2bd,1ba). In '99 we bought another a block away (2bd,1 1/2ba). In '03 when we might have been able to do it again, the madness had already started and we were priced out (I would only consider 30-year fixed money).
I did not want condos or townhomes as longterm rentals, strictly SFHs. I watched for 5 years as everyone and their brother become landlords it seemed. The numbers just did not work, and my investment strategy was put on hold.
By the way, the one rental we do have still about breaks even each month after 8 yrs. And that is with a 30-yr fixed, $130k at 6.25%. Others would buy a similar home for $340k and rent it for the same price as mine. But they put alot of value on calling themselves real estate investors.
I have put your quote in red above that sums up a big part of why we are facing the problems we have today. Add to that the people who pulled equity out of their own personal homes to buy investment property. That is straight gambling, and Vegas is alot more fun than owning rental property.
So this house sold at 40% of the original ask. All this tells me is that the owner and their Realtor(s) were sustaining a fantasy, not necessarily anything to do with the market.
Chances are, if it were more realistically priced to begin with, it would have sold faster and probably for more money.
Asking more does not mean getting more. It just takes some owners and Realtors to get this.
On the other hand, this house might be in an area with a 40% drop-off.
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But they put alot of value on calling themselves real estate investors.
