Last week, I talked about just a few things to consider when determining if investment property is right for you. This week I wanted to give you a couple of real life examples of properties that were purchased last year and let you see the difference just 1 year can make:
Example 1: Located a 3 bedroom 2 bath single family home in a quiet suburb town outside of Springfield. This home was a foreclosure and listed for $75,000. House was built in 2003. Brick front, vinyl siding on the remainder and no privacy fence. HVAC equipment in good shape, roof in excellent shape, interior needed clean up and paint and new flooring. Other than that, its move in ready. We offered $73,000 and got the house, closed in 30 days. The new owner installed a new fence, painted, put in new laminate flooring and did some clean up. Advertised the house for rent on Craigs list for $775 per month. After 3 days, an older retired couple called and rented the place. They described a situation we hear all the time. They were caught in the economy, retirement investments evaporated just at the time they were retiring, lost their home so moved to the area to be closer to family. The husband said they will remain renters until they go into the nursing home. Both draw a social security check every month. The owner informed me they pay the rent on the 20th of the previous month due to make sure it's on time. He's not had one issue with that house. Just this past week, another realtor in our office listed the house immediately across the street from the rental. It had a couple of upgrades over the rental like granite counter tops but exact same floorplan, square footage, etc. List price for that home is $113,000. Now, in 1 year, the owner has received positive cash flow from the house, will depreciate the house on taxes, AND conservatively pick up $35,000-$40,000 in equity. By my calculations, the investor has picked up $45,300 for his $7300 down payment, not to mention again, the depreciation he'll get to claim on his taxes. Not bad for 1 year of investing on 1 house.
Example 2: Same investor came across a house for sale that is not in his normal area he's interested in but to him, it seemed like a great deal. 3 bedroom 2 bath house on a corner lot with good visibility from a secondary through street. Neighborhood not bad but low middle income. House is a frame house, vinyl siding around and square footage is a little small. Asking price was $50,000. We offered and was accepted the $50,000 for the REO property. This house needed work and quite a lot which is why I was shocked he wanted the house. It needed new flooring throughout, kitchen cabinets needed redone, of course paint throughout along with a new fence for the back. After getting into the house, the inspector didn't find it needed a new HVAC which set my client back a few bucks unexpectedly. While he was working to get the house in shape, every day, people would stop by the house to see if he was interested in renting it. He would say he was but wanted to finish the house first so he'd take their name and number and call them back when it was completed. He wasn't even sure how much he would rent it for at that point. He only had a range in mind. Once completed, he started calling back the prospects. All returned and was ready to rent......all 14 of them. Yep, he had 14 prospects with no advertising. He rented the house for $675 per month which was about $50 more than the neighbor next door with the exact same house. This house happens to be his best cash flowing house of his group right now.
These are just 2 examples of how investment property can work for you if you're ready to work for the deals. It may seem these deals just popped up but there is some work and research done on a daily basis. The key is knowing what a good deal looks like when you see it. Know the market, know your limits and comfort levels and get a good, honest realtor that can help you find those gems that are out there. Additionally, they'll help you navigate the sea of paperwork on the REO's and do the heavy lifting on negotiations and coordination to make the closing day smooth as silk. A good hard working realtor can be a key asset in your stable of people getting you leads on houses just on the market or those worn out from over exposure because of having too high price for the property.
Anytime you have questions or suggestions for an article, drop me a note or make a comment on a post and I'll respond. Hope you have a super week this week.
Mark
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