Foster City, CA · Member since 2013 · 17 posts · 2 votes
I've got about $300k to spend on a home that offers capital appreciation along with some decent rental income (not expecting it to necessarily cash flow).
Does it make sense to buy a larger house in the suburbs or a smaller home (or townhouse/condo) in the city? Let's say both options would yield the SAME capital appreciation. Does it make sense to buy a smaller home or condo?? My assumption is that with a small home or condo...there are fewer potential repairs compared to a large suburban home. Does this hold water? Or should I be thinking beyond this?
Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
12y
Two things to point out.
First, never reveal in public (like on the internet) how much money you have available; doing so will attract all sorts of unsavory types who will try to separate you from that money.
Second, don't "spend" the money, instead "invest" your money. And do so wisely.
Why is that Black Magic. Keep in mind what I wrote, "put that same $50k in" a house. I didn't say buy the house for $50k. That $50k cash represents purchase and rehab. The rehab justifies the added value (to $62k). My lender will lend between 75-80% ARV/LTV, with no seasoning, on Non-OO.
So you are talking about forced appreciation play. How's that related to cash flow? Or am I missing something?
And to have an all-in budget of $50K you better have a very sharp pencil. There is practically no margin for error. Upshot of that is you have to be local and know the market inside out. There is no room for passive investors sitting 500 miles away in California.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
12y
@Manch Hon Actually, there is room for passive investors. This market is full of them...from California. California investors flip houses in their state, and invest the profits here in CF houses. Very common.
...and the $50k I mentioned is usually the ceiling. The question was "How to spend $300k" I assume cash. If someone was coming in with $300k cash, they could easily buy/rehab 6 houses, and cash flow each with property managers at $400...that's $2400/month. Since they were all cash deals, every property has 100% equity, so you refi each of them and do it again. That doubles your return to $4800/month.
When you can't get any more mortgages, you become a cash partner for someone that can, and split the returns. When that partner can't finance any more, you are the cash partner for another partner that can, and so on...