Archive for the ‘Investing in Real Estate’ Category:

I attended the Portland edition of REDC’s/Auction.com real estate auction this morning.  Our out-of-town client was the winning bidder on a property via the webcast.  I tracked the sales prices of the 26 properties and the graph shows the sales price in relation to the published catalog value: the overall average was 44% (three of the properties did not have previous values).  The screen shot below (randomly chosen) is what an online viewer was seeing at the same time.  The web was only fraction of a second behind the live.  How long doe a real estate auction take?  I timed the opening bid to gavel on the the first few properties: 61, 55, 94, and 121 seconds!  They move through them very quickly but make sure that bidders know what they are getting into.  There is a 5% buyer premium added to each sold property that can be financed into the purchase if the property is eligible for lending; about half were. (more…)

Ring. “Hello, this is Charles.” “Hi Charles, this is John, I am a real estate investor.” “How many properties do you have, John.” “None, but I have been watching the market for years.”

John is not a real estate investor. He is a real estate watcher. Nothing wrong with that but many people enter the New Year with aspirations of buying an investment property and never do. The New Year’s Resolution has no mercy.

Every investor has a different strategy. For us, it is the single family unit in close-in neighborhoods. Our goal is to find a home that needs little or no work to be in “renter condition.” Something around a B, B- on the scale of livability- we have no interest in being slum lords. When it comes time to sell it, we’ll remodel it to A condition. (more…)

*** Disclaimer: this is not tax advice- consult an accountant with specific 1031 Exchange questions!

We’re selling NE Ivy St. as an investment property. The price difference of what we bought it for in 2001 and the selling price now would be taxable as a capital gain on our income taxes. The 1031 Exchange allows us to reinvest the money in another property (or multiple properties) without paying capital gains.

Wikipedia has a great synopsis of the way it works. (more…)

Everyone wants a property that they can put little or no money down (leverage), rent out for more than it costs (cash flow) and will be worth a ton more than they paid for it when it sells (appreciation).

Putting the three together determines if you have a good investment. Not all three have to be favorable to have a good investment.

Let’s say we buy a $200,000 house. We put $20,000 down (10%) and have a loan calculated over 30 years at 6%. That’s a monthly principle and interest payment of $1079. Add $221/ month for taxes and insurance (all these numbers are fictional). Our monthly payment is $1300.

The property closes and now we have two different rental scenarios. First, the renter moves in and happily pays $1500/mo. Gross cash flow, providing there were no other expenses is nearly $200 per month. The other is that it only rents for $1100. Now we’re writing a check for $200/mo. Not so fun!

If we had put more money down, say 30%, our payment drops by $240. Now we’re making money on a monthly basis. Sounds great but we have lost our leverage. Now were using our money instead of someone else’s. (more…)