BIG or SMALL

BIG or SMALL

First of all, I have been involved in Real Estate for many years.  I have created my business as well as other businesses off of investors.  This blog is concentrated on investing in Real Estate.  My goal is to give a wide variety of thoughts and plans and ideas as well as pros and cons in investing in Real Estate.

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..