Comments on: Wise Choice?

By: Sol

Sol — Thu, 30 Jul 2009 18:47:44 +0000

I like the Daily Show’s take on this – http://www.thedailyshow.com/watch/wed-july-29-2009/home-crisis-investigation

By: Joe Schmoe

Joe Schmoe — Wed, 29 Jul 2009 21:47:53 +0000

Mozart,

The amount you net is irrelevant by itself. I could buy a $5mm house with all cash and rent it out for $3k a month and net something (maybe). That doesn’t make it a good investment (obviously).

By: Joe Schmoe

Joe Schmoe — Wed, 29 Jul 2009 21:45:45 +0000

This is not to say that my assumptions are correct (in fact I think I am being very optimistic), but the math is correct.

By: Joe Schmoe

Joe Schmoe — Wed, 29 Jul 2009 21:42:52 +0000

Myriad,

My 9.5% is the compound annual return assuming the property is sold at the end of 30-years. The 9.5% is not the return number for a specific year. The cash flows in my ‘model’ are negative in the early years and turn positive. The return comes from the fact that I grow the property value at inflation, while obviously the cash outflows (the mortgage payment) is fixed.

The cash flows in the model I was using do not turn positive until year eight.

By: tj and the bear

tj and the bear — Wed, 29 Jul 2009 20:34:59 +0000

I bought the ugliest house on the block in an up and coming neighborhood, fixed it up with a lot of sweat equity.

Smart move.

By: Anonymous

Anonymous — Wed, 29 Jul 2009 20:16:47 +0000

My current renter loves living here, we take of each other mail, watch each others dogs and keep an eye out when each other is traveling.

To each his own I guess, but having my landlord bring me my mail just seems like too much of an invasion of privacy.

By: Mozart

Mozart — Wed, 29 Jul 2009 17:19:24 +0000

If anybody cares we net about $800/month. I bought the ugliest house on the block in an up and coming neighborhood, fixed it up with a lot of sweat equity.

The house is basically new, no maintenance to speak of. Not huge money but it’s a little something every month. Maybe in about 3-5 years sell it and do it again.

By: doughboy

doughboy — Wed, 29 Jul 2009 14:37:10 +0000

Renters make their own nighmares Anonymous. My current renter loves living here, we take of each other mail, watch each others dogs and keep an eye out when each other is traveling. Owners and renters can create each others win/win scenario when you take the time to chose the proper fit. Just ask JTR. He bought the house next door to his and rents it our so he can create his personal space!

By: Anonymous

Anonymous — Wed, 29 Jul 2009 13:54:32 +0000

A retirement plan would be in 10 years to remodel the guest house and its single garage and move into that with my wife as we’ll be empty nesters. Then rent out our 5200 sq ft/3 car garage house to an exec w/ family as retirement income. I would highly recommend a property like ours.

Sorry, but that just sounds like a renter’s worst nightmare. Landlord living in the back yard? Definite negative.

By: Myriad

Myriad — Wed, 29 Jul 2009 12:45:54 +0000

Joe Schmoe, not quite sure how you’re getting the 9.5%

Using the calculator at http://lpbservices.com/InvestmentPropertyAnalysis.xls

I ran some quick numbers on a monthly basis for the $795k home with 20% down:
Assume some basic costs
$50 Insurance
$100 Maintenance reserve
$75 HOA
$50 Misc/Gardening, etc
$729 Taxes
= $1004 = (Low considering maintenance reserve should be 1% a year)
Mortgage payment on $636k loan at 5.5% (its probably a jumbo, but lets just says its 5.5%) = $3611
$800 (mortgage tax deduction, if you have the income to support a $9600 yearly tax deduction)
So on a simple cash flow basis,

So on a monthly basis, $3200-$1004-$3611+800= -$615
So on a simple ROI, you’re getting somewhere like -6%
So rent need to be higher just to break even.