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Hi Gary,
Thank you for your elaborate response. Your numbers sound very
reasonable. In fact, your $1,200 estimate is very close to %1.25
monthly rate which I read in most real estate investment articles
and posts. In my case, I wasn't thinking about switching to real
estate investments. However, a student organization approached me
to help them out secure a rental property since they are having
difficulty finding a place to rent. Most landlords do not like to
rent expensive properties for undergraduate students, especially
if they do not have a credit history. Since I know these kids very
well, and I am comfortable with their financial situation, I
promised them that I will consider it. However, I am setting my rate
of return at %1.50 instead of %1.25 for two main reasons:
1. Undergraduate students are considered higher risk tenants by
most landlords, so there must be a little premium for that matter
(not sure how much premium the market sets for this particular
reason).
2. Real estate isn't really my thing, and I am already doing well
in stock market. Although I like trying out my luck in different
kinds of investment, I think I should have some premium too for
locking my assets in real estate during favorable stock market
conditions.
So what do you think? Does %1.50 sound reasonable in this particular
case?
Best regards,
-AA
bbs@mechanicsofmoney.com wrote:
> I've been investing in real estate for a copule of years now. I
> invest for the long-term. Meaning that I'm looking to landlord (or
> pay someone to do that) and not flip properties. With this mindset, in
> the market that I've been investing in (various parts of Texas), I
> have been able to net $400 or so of positive monthly cash flow for each
> $100K of mortgage. If I was able to do the deals without mortgages
> (which I wouldn't do), the positive cash flow would be somewere around
> $1200 or so of positive monthly cash flow for each $100K. So for what
> rent I'd accept, I'd add up all expenses (plus allowance for
> managment fees and monthly amount to pool funds for repairs) and then
> add in the monthly cash flow that I'd want. I then compare that to
> prices in the papers etc. for what similar properties are renting for
> in the area. If the numbers do work out, then that property is
> immediately off of the table. If the numbers do work, then I do the
> rest of the necessary due dilligence (i.e., inspect further, look for
> value propositions, etc.).
>
> Hope that helps.
>
>
>
> Gary Brolis
> http://www.MechanicsofMoney.com
> http://www.MechanicsofMoney.com/blog.php
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Re: Real Estate Monthly Rate of Return
