Hey, People.
If you've watched all of the reality shows on how to invest & fix up properties to "flip" we have some re-educating to do. The "flip" is dead (At least in San Diego) unless you buy the property at an auction for all cash (Someone will find that one in a million example to prove me wrong. That house that was bought for $100K, had it's light bulbs replaced and was flipped for $200K. On a whole, flips are dead).
Properties on the market are priced correctly (Again, somebody will find that lotto house that only needed the drive way swept before he flipped it for a quick $20K).. Do not think you can buy something, slap on some paint, throw in a Ficus tree and think you can sell it for a profit. The seller knows (At least his listing agent knows) how much to deduct for paint and other cosmetic fixes. Plus you have closing costs (On the buy and the sell), mortgage payments to make while you own it & realtor commissions (96+% of all houses sold are done through a Realtor. You don't have to use one but it will usually take you longer). It ain't 2004.
The good news? Since it's not '04 and since prices have come down mucho faster than rents, it's a great time to invest in rentals. I have a client who's in escrow on a duplex that she's paying $315,000 for. The rents come to $2550 a month, gross profit. Her mortgage payment, taxes & insurance will come to under $1750 a month. A potential of $800 a month in her pocket. That's just potential. To be safe, you should multiply your gross rent ($2550) by .8. That comes to $2040 net before mortgage, $300 a month of approx net.
That's about a 7.5% capitalization rate (Take the net rents, before mortgage, and divide it by the sales price. The higher the rate the better). Back before '06 you'd be lucky to get a 4 or 5% cap rate.
These are pretty conservative #s, you should do better on your investment.
Check out the old article I found by clicking on the title.
Call me with any questions on investments, 619-507-7449 or email me at jack@rowellrealestate.com
God Bless.
A San Diego real estate blog for sellers, buyers, investors, short sales, foreclosures and everything in between. An honest look at the good, the bad and the ugly.
About Me
- Jack Rowell
- Hi People. This blog is an informative and satyrical look at the real estate industry. I've been a real estate broker/ realtor/real estate investor for quite some time and I am a panelist on The San Diego Money Makers Radio Show.
