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Real Estate An Opportunity for Someone Else?

Discussion in 'Real Estate Investing' started by PEERless, Mar 23, 2008.

  1. PEERless
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    PEERless Bronze Contributor

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    As many of you know, my investment capital is tied up in what may be an alligator, but maybe someone here can benefit from my research.

    See this Spokane duplex.

    My calculations see it cashflowing $1200/year and profiting 19%/year on $23,000 down.
     
  2. rcardin
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    rcardin Contributor

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    An investment mortgage would only run you 10% down. With closing costs and mortgage fees you would still be looking at payments around 1050 P.I.T.I. If you could pick it up around 75k-78k it would be a great deal. Part of my plan is to get them at 70-78% max of market value.
     
  3. PEERless
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    PEERless Bronze Contributor

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    I see, I see. Any value in paying more up front?
     
  4. Runum
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    Runum Platinum Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass Summit Attendee

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    The more you pay up front the more you are risking and the more the deal better be a sure shot. Also, if you pay more into a deal it slows you down in getting into other deals.
     
  5. PEERless
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    PEERless Bronze Contributor

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    Right, I see. So 20% equity doesn't leverage my money as much as 10%?
     
  6. Runum
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    Runum Platinum Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass Summit Attendee

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    You got it. If you can do a deal and it CF's acceptable with 10% down and you're buying below retail you stand to make a profit from monthly CF and selling in the future for a profit AND you have some more cash to go get another deal. For you it's a win, win, win.:icon_super:
     
  7. PEERless
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    PEERless Bronze Contributor

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    ...winwinwin. Great points. Thanks.
     
  8. MrPink
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    MrPink Contributor

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  9. Hostile
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    in my town it is cheaper and more profitable initially to invest in the worse neighborhoods, but, they take way more time and money to maintain. This is according to a couple different people I know who have done it and another who is currently tired of busted cupboards and slashed carpet, and on his way away. On a side note, Gary Keller wrote an awesome book about real estate investing. He is the Keller in Keller Williams Realty, large company.
     
  10. biophase
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    biophase Legendary Contributor I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    How do you get 19%?

    1200/yr/23000 = 5% COC return.
     
  11. rcardin
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    rcardin Contributor

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    I would never get into a property that is going to cost me more than 10% down. there are too many deals out there you get pick up for next to nothing. Do some research on subject to properties and see how you can pick up a sfh for little more than moving expenses for the owner.
     
  12. PEERless
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    PEERless Bronze Contributor

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    But a Profitability spreadsheet takes more than cashflow into account. ...something I obviously didn't know.
     
  13. JScott
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    JScott Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Generally, when you refer to "profit", you're referring to the cash-on-cash return. In this case, the $1200/year cashflow on a $23,000 down-payment translates to about 5% return on investment.

    Even if you take equity accrual and tax benefits into account, you're total annual return on investment is only about 10%.

    I think Biophases' point was that he doesn't see how you got the 19% return value using any return calculations... (and I don't either)
     
  14. PEERless
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    PEERless Bronze Contributor

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    Oh. I'm an admitted REI noob, so I just reported what the spreadsheet spit out at the end. I can upload it for you to see, if you like.
     

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