Does this investment property make sense

6 Replies

Hi


New poster to the web site. I wanted some advice on a investment property

Details - New Construction (the community will have walking trails, dog park, tot lots, club house).
Price - 329,999
Down payment - 130,000
Comparable rent per month - 22,200 per year
Property taxes - 4000 per year
HOA - 1164 per year
Excellent credit
Tax Bracket - 28% federal
Already own another townhome for investment and have 40% equity on that town home. No other debt with primary residence fully paid off

The town house is next to a town center which is slowly expanding and most of the big stores will start moving in soon (Sams, Target etc) and construction in the area is booming with lots of homes under construction. There are also a lot of houses available for rent in and around the area

Not sure if this is a good investment. Any advice would help

I wouldn't want to tie up that much money into a property that might not net any income.

From what I understand rent would be 1850

mortgage might be 1300 + (4000+1164)/12 = 1740.33

Of course since the property is where people might want to buy in the future then you could see a profit when you sell.

I'd want to see that there are people that would want to rent there.  I would think most people making that much money would want to buy instead of rent.

Another huge consideration before buying is whether or not the HOA will allow owners to rent properties in that development.

I am declaring up front that this is a investment property at the time of purchase. 

The property is in loudoun county

"Run" you are making less then 2percent on your money, with 130k I would look for a 12 to 20 percent return, and probably go commercial if you are willing to settle for 6 to 10 percent returns buy good properties and the appreciation will be comparable, more important if you miss one mo. rent it will take a year to get whole, I personaly would stay away

Mike

That amounts to $1800/month rent. The rent/cost then is 0.5%, which is really low. And you also will have a ton of cash tied up. Unless this property has a lot of equity and you can flip it, I would definitely walk. 

Thats the real problem I see with this deal. Not so much the returns which are still better than stocks or something I think. But you're getting no equity capture deal in the deal. That just doesn't make sense.

I know that most of the foreclosures these days have dried up. But there are still some that are out there. And you should be able to get 10 to 15% in equity capture at the very least. On a 300k deal, thats 30 to 45k in equity you should be getting at a minimum.

One of the key tenets in real estate that you'll hear all the time is:
You make your money on the purchase......

In this case, you're not making anything on the purchase. You're paying retail.

Unless you can negotiate a 10% discount with the builder, I wouldn't do it.....

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