So investing in Real Estate....Last time I mentioned BIG and SMALL investments and the return which certain types of investing can give you. Comments came about and people asked, but I don't have very much money or I don't have cash just laying around. Well neither do I, so how can people like you and I invest in REAL ESTATE. Well..
There are a couple of ways, first of the simple way--rent out a room out
of your house. Rent a house with an extra room and rent it out for half
the rent. This will save you money and create a cash flow to start
investing. Or if you own a house, rent out a section. Either the garage,
or a room. Or if you think you are handy, convert your house to a
duplex! Okay, so that sounds far fetched, but that is what I decided to do.
So I have a 1100 sqft 3 bdrm 1 bath house and I decided to create a
studio apartment on one side. One of my bedrooms is 20x12. I closed off
the door to the rest of the house and put in an exterior door to this
room. Then I took out the ceiling and created vaulted ceilings to give
the space a bigger feel. I split one side of the room in half and put a
studio kitchen on one side and a bathroom on the other side. We added
stairs and created a loft above the bathroom and a separate bed area with AC above
the existing living room in the attic. Two of us added the sewer lines,
water lines, move and added electrical lines, framed all the walls, textured
and painted everything in about a week. (Granted I have to add cabinets
and finish some tile and put in the floor, -which might take me another
month-but everything else is done.) So the first question people ask..
wow! How much did that cost and is it worth it. Well, Thank You
Home Depot! They financed almost all of it via a Home Depot card.
Even with the interest, the rent I will receive from this studio apartment will
pay my card off in about 6-7 months. So is changing one room in my house
and creating a cash flow for as many years as I want worth it? ABSOLUTELY
If you are interested in pictures, let me know or if you are interesting
in creating your investment and have questions on how to get started,
call me; 972-322-1717
Monday, July 2, 2012
BIG or SMALL
This article is going to be about SMALL sale PRICE vs. BIG sale PRICE.
So do I purchase a condo for 20k or a small run down house for 15k or do I purchase newer home for 200k or a newer home that needs work? This really comes down to how you want to spend your money and how you want your investment to come back to you. Of course there are many thoughts on this and the results vary per purchase, but rule of thumb is higher the price of house you purchase the longer it will take for you to recoup your money. Also, the dollar figure has a potential to be higher, the longer you hold on to the property and the longer you rent it for. To put things short.
In Dallas you can buy houses for as little as 15-20k and rent them out for as much as 750 a month. This is a great return on a monthly basis; though do not expect to sell it for big cash in 10 years and retire on this investment. Now of course if you have a bunch of these and know how to do the maintenance on them, you could live off this residual income. The idea is to recoup your investment in 2-3 years and have the freedom to sell whenever, knowing you have made money; no matter what you sell the property for.
Now if you buy a house for 150-200k and your mortgage payment is 1500 a month; you can typically rent it for 200-300 more than your mortgage payment. Even if you rent it just to cover your PITI you can essentially break even on a monthly basis. If you rent it for more than your payment, save this money for repairs and months you do not have a tenant. The advantage of this type of investing is that the tenant is paying for your house. When you go and sell it, all the equity that has been created by your tenant becomes cash in hand. So in 20 years (depending on how long your mortgage is set up for) when you want to retire you can sell the property and walk with all the cash. The idea of course is to sell it for much more than what you paid for it, though this depends on how long you keep it. Even if the market continues to be steady, after 20 years the price will still increase; or at worst it will be the same. Some argue that if it is the same, you have not gained a profit; though on the other hand you have still. If the tenant pays the mortgage and your monthly investment is minimal, after 20-30 years the house will be free and clear, netting you all the cash from the sale, no matter what the sale price is. The disadvantage of investing in something like this is that first you are more than likely will be required to put down 20% when you buy it and it does not make financial since to sell it within the first few years. This is more of a long term investment (it takes an avg. of 8 years before PITI starts to really effect the Principal)
Comments on real life experiences and thoughts are always welcome..