Buy or not to buy a 10% ROI invest
Hi, first of all I introduce myself: My name is Guillermo, I'm 24 and I'm from Spain (you'll notice my english is not perfect at all). I have a small online business that makes around 60.000€ a year... now I what assets!
I've read some books about getting different concepts and knowledge about money like the ones from Robert Kiyosaki (I love then, if you haven't read them, do it!). I've just read one book about Real State "The ABC's of Real Estate Investing - Ken McElroy", I'm not an expert at all but I feel like starting.
Today I was walking around downtown where I live in and I found a comercial property for sale. It's a small one, just 35m2. I called the owner and he wanted 155.000€ (no way), I made a quick math in my head and offered him 47.000€ and he accepted (I thought we was going to insult me or something).
According to my numbers, the ROI is 10% putting 47.000€ down (no loans, Warren Buffet style). I've read in this site some beginner who get over 20% ROI with no problem.
What do you think about buying this property? isn't the ROI a bit to low? what about not buying debt?
Other thing I'd like to mention is that the owner has another comercial property right next to the one I like and he has not rent it nor sale it in a whole year.This makes me wonder if it's a good idea, maybe small business are unstable so my investment will.
What do you guys think? Thank you very much.
Buying all cash reduces your ROI because your investment is much larger than if you were to leverage (get a loan) the property and only put in 25%.. With interest rates as low as they are right now I think buying with cash without a plan to pull out equity down the line is a poor use of capital.
Originally posted by Andrew Jones:
With interest rates as low as they are right now
Are rates really that low in Madrid?
Or did you not read he's in Spain?
Guillermo, the best advice is you need to experience with your local market. The return you get is going to be very dependent on where you are. A 10% cap rate might be great, or it might not be.
You also need to research the exact expenses and NOI of the property. I suggest you find an experienced investor near you that you can get advice from and discuss your deals with. Many (or any?) here won't be familiar with Madrid's market and won't be able to give you the advice you need.
Your correct Joe. It seems the commercial loan prime rate in Spain is almost 3 times that of the USA's.
Sorry for being in silent for so long! I'm a bit busy finishing my career.
Good Point Joe O, fixed Interest rates in Spain are around 6% 7%. Expensive, aren't they?
Andrew Jones, I completely agree. Buying all cash will be a very slow road.
What do you guys think I should do with such a high rate? Numbers don't work out with a loan that expensive. I'm young, hungry and foolish I could perfectly move somewhere else and start up there.
Even thought I have 40.000€ available to invest I still feel my first asset is very far away.
I did not buy the property by the way.
Sorry because of my poor english.