$300 income?

[Alison Michel]

Hi BP,

A friend and I got into a discussion about real estate investment. Neither of us have made our first purchase yet, but are both looking to soon. I told her about an investment potential that would result in $300/month income (assuming my numbers are right). She thought that seemed like too small a return for the trouble. She was also concerned about the neighborhood where the property is located, and thought it was bad for the local economy to be an outside investor rather than encouraging local homeownership. She is looking for a larger property in an area that is more likely to increase its value over time because of its location. I argued that if I'm a fair landlord who maintains the property well, that is good for the neighborhood, and that making $300/month for a property that is managed by a property manager is a good start for my own REI business. What do you think?

Thanks!

Alison

[James Mudd]

...sounds like your friend is banking on appreciation. So, she thinks $300 per month positive cashflow is not worth the effort, however she wants to spend more money on a larger property and and hope it appreciates, that should always be a bonus, not the goal...also, the more you spend on a property typically the cash flow is less. You also can only obtain a few properties rather then numerous properties because you use up your debt-to-income ration.

Your friend also says it's bad for the local economy for investors to come in. Wow...She is way off on that! Think of all the properties that were neglected and investors brought there time, skill and money to turn it into beautiful properties.