Would you proceed with this investment?

Let's say I can buy a townhouse/condo for $100k and paid cash for it. With the house paid for, all I have to worry about is the property tax and association fee which comes out to be ~$450/month.

If I can rent it out for $850/month netting a $400/month profit.

Is this wise or I am better off doing something else with the $100k?

Assume that I can't get a loan to finance the rental property because I have no income. I just have a lot of assets.

$450 per month is $5,400 per year. That's 5.4% annually on your investment of $100k plus whatever appreciation you may be able to get assuming that you have zero maintenance costs over time.

I'd say no go on that deal. There are plenty of hands off investments that will yield 5%-6% dividends plus appreciation. You might as well buy into a REIT at that rate to be in the exact same market but have your risk spread over more than one property. Or you could buy a basket of dividend stocks and get similar results.

If you are going to risk that much in a single investment and have the problems of renters, you ought to get a better return for your time and risk.

With the market we have now if I were wanting rentals I would be looking at foreclosures. It sure seems like now is the time to get some bargains in real estate, but then again I don't own any. A friend of mine is living in a 80k house he paid 35k for. He is going to bank when he sells it in 5 years or so.

If you want to get into investment property - I highly recommend financing them. That way, you maximize the tax benefits, AND keep a huge chunk of the cash on hand for inevitable repairs. Now - the $450/mo would mean that if you financed 80% you would be paying about $900/month - which means that the fees/taxes make that less attractive.

In general - that margin is too slim to assume the risk of not having tenants. The good news is that paying cash offsets some of that risk, but I just don't like giving up all liquidity.

-shooter

You could almost buy 2 houses in Phoenix for $100k and make $875 each per month.

Personally I would leverage the $ to buy more but reading your post makes it sound like you can't get financing.

Putting $100k in cash to make $400-450 per month is not worth it in my eyes.

To me that's a lot to spend for $400 a month in profit. I have ATM machines that make more than that each month and they only cost me $2000 each. And there's no guarantee the value of your home will go up while you own it.

Would you mind starting a thread about your machines? This sounds interesting to me.

-Jdude

Thanks for the advice so far guys, I'm having second thoughts about this idea.



I was thinking about this idea but have no idea where to start. Where is your ATM located? (Mall? Convience store? etc..) How many ATM do you have to earn you $400/m? How much do you charge per transaction & does that amount split between you and the owner of the property? how much does visa/mastercard charge you for each trans?

I was going to say "Go for it" until I read all the anti's.

I will say this: It is very difficult, or impossible, to reliably make 5% on a traditional Stock Market dividend stock.

And then, even if you do manage it, taxes will eat most of your profits.


The question is far too complex for a straight up or down answer. It depends on your market conditions, how efficient you are at keeping it rented and maintained, and a hundred other variables.

There is NO foolproof way to make 5% on your money. I wish there were.

Sure, ill do a thread on the ATM's this weekend.

Please do, Thanks!!

Did I miss this? I'm interested in any details or info you're willing to share too, thanks.

I posted (finally).

http://www.ar15.com/forums/t_1_133/1298712_.html

I wouldn't bother with real estate unless I could make a minimum of 10% return - it's not worth the hassle otherwise.

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