Investing in Real Estate – Know Your Numbers

 

Real estate investments should be part of your overall investment portfolio. Why?

Return on investment – plain and simple. In looking for investment property properties the first factor I look for is the 1% rule. Will the possible monthly rent be at least 1% of the investment basis (purchase cost plus any renovation cost).

Example: a client recently bought a one bedroom condo for $58,000, the monthly rent will be $750, monthly condo fees are $100…….. so net income is $650 which is 1.12% of the purchase price. Again anything 1% and above should easily be cash flow positive.  Besides positive cash flow, I look for properties that have the potential to appreciate in value over time and the key to that is the proverbial “buy low”. Recently I have found the best values in foreclosed condos.

Example: a client recently bought a Fannie Mae foreclosed two bedroom condo for $45,500. Comparable units sell for $80,000 - $85,000.

 

There are plenty of opportunities out there and it is possible to start with a modest initial investment. Most importantly – Know Your Numnbers!