Owner Financing
| Acquisition: | Conventional Financing |
| Exit Strategy: | Take 3 mos. to find buyer. $5,000 down and the balance financed @10% using a 30yr amortization. Balance due in 24 months (buyer can refinance). Sell price adjusted using 2%/annual market appreciation rates. |
Highest out-of-pocket balance: $12,185
Net profit at end of 2yr term: $2,120
Net profit when buyer closes: $34,357
Total Return On Investment (ROI): 282%
Annualized ROI: 81%
Sell Retail
| Acquisition: | Conventional Financing |
| Exit Strategy: | Do any repairs, and sell retail, using a RE agent. Figure 3 mos. of holding. |
Highest out-of-pocket balance: $11,498
Net profit when sold: $12,692
Total Return On Investment (ROI): 110%
Annualized ROI: 1,029%
Rent-to-Own
| Acquisition: | Conventional Financing |
| Exit Strategy: | Take 3 mos. to find buyer. Two months rent as DP (i.e., goes towards purchase price) + one additional month's rent down. 2yr option term with no rent credit. Sell price adjusted using 2%/annual market appreciation rates. |
Highest out-of-pocket balance: $12,098
Net profit when sold: $32,641
Total Return On Investment (ROI): 270%
Annualized ROI: 79%
I'm not even going to post the figures for a rental because they are pretty much all negative until I decide to sell the house (ore refinance) years down the road. As you can see, buying and then turning right around and selling yields me the best annualized ROI. This is the option I am leaning toward, but my wife still wants to do a long-term hold. I'd use the proceeds to pay the property taxes for House #1 (~$3,250), which would leave me with about $9,400. I took a good hit with House #1 when I bought it, too, which I'm still trying to pay off. I could then use about $4,400 to pay some of that off. I'd then use the remaining $5,000 for my next acquisition, if need be, or use it to pay off my personal property taxes (which will be about $5,000).
4 comments:
Great blog. You're doing a great job. I've also been using Seeking Alpha's write ups of the housing market, and thought you might also find them useful.
http://usmarket.seekingalpha.com/by/type/housing
Great numbers my friend and well done!
FYI you and/or your readers may be interested in a few facts about another area.
Thought I'd add some real estate facts about another area.
FYI in the second fastest growing state outside of California, it appears that the
growth in Cape Coral Florida real estate (ranked fastest growing city in US Census
2006 for pop'ns over 100,000) has not all been lost (despite it's real estate
appreciation has dropped
to 18% from a 3 yr average of 28%).
Total Sales for 1 Week (last week) in this 155,000 pop'n city
came to $45,527,400.00.
Here are the figures...feel free to
follow through and learn more.
NON RESIDENTIAL:
1631 Del Prado Blvd sold to Coral Pointe Investment LLC $23,141,200.
125 NE Pine Island Rd. sold to Cape Croal 20 LLC $2,550,000.
3670 Del Prado sold to Talan, Corp. $675,000
Ne Pine Island Rd. sold to Pine-Andalusia LLC $369,500.
1106 NE 8th St sold to Edward Short $90,000
RESIDENTIAL:
SE Cape Coral-33904:
$3,130,500.00
N. Cape Coral-33909:
$4,895,500.00
SW Cape Coral-33914
$5,567,600.00
Central Cape Coral-33991
$3,383,900.00
NW Cape Coral-33993
$1,724,200.00
Residential Sales TTL:
$18,701,700.00
Commercial Sales TTL:
$26,825,700.00
TTL= $45,527,400.00
For any of those real estate investors or homebuyers that have any
uncertainty, it's hard to ignore these numbers.
The market is still moving upward...one week and that much in
transactions - pretty darned good.
Check more out at http://capecoralfloridarealestate.blogspot.com/
I agree that your numbers look great, Steve! And, any of those options for using the house as a flipper would work. I guess you'd just want to see what the area allows. You could advertise it all three ways at once and see what kind of deals come from it.
Don't sweat it that your first deal left you in the negative at first. Mine did, too. It was the learning experience that led me in the right direction, though. So, in that sense, the deal was priceless.
Thanks everyone!
At this point, my wife and I are considering on putting it both for sale and for lease - and see which one happens first. The more I look at this deal, the more I want to just sell it. It's a nice little house in a decent neighborhood, but that money looks awfully attractive for a miriad of reasons. I'm guesstimating an Oct 20th close, although, it could be extended according to my agent - so we'll say Nov 1st. From HUD's initial inspection and my own observation, the only things needed to sell would be a good cleaning and to replace the master bedroom door. It may need painting, too, but I'll avoid that at all costs. So, I'll say it needs $750 in repairs. Based on my research, the comps show a marketable price of $125,000. Therefore, my monthly net profit breakdown would look like this:
Dec 1: $14,922
Jan 1: $13,807
Feb 1: $12,692
Mar 1: $11,578
I'm guessing 3 months on the market, which is conservative right now for this area. That will give me a net profit (excluding tax incentives) of about $12,700. That money could pay for the taxes on House #1 as well as pay down our CC we used to put a lot of stuff on for House #1. The remainder could then be used for another property (i.e., closing costs, DP).
I'm afraid if we rent it out, we will put ourselves further in debt so that we couldn't even buy another house due to our DTI being so high. We'll see.
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