UnThreaded | Threaded | Whole Thread (51) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75612  
Subject: Re: How much is enough? Date: 1/9/2011 5:44 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Goofyhoofy,

A correction. My initial investment in our Boston condo was $5,000, not $10,000. I was chatting with my father about it (because it was top of mind thanks to this thread) and he reminded me that the downpayment was $5,000. He should know, because he loaned me the money for it ;) So my $5,000 "investment" mushroomed to $550,000 in 30 years. Not shabby. Better than a 15% annual CAGR across three tumultuous decades, even discounting terminal value for fees and taxes.

Pretty good, but surely you had a loan and other expenses since you only put a downpayment and didn't buy the property outright.
I bought my townhome for $228,500 in 1997 with 7% down, did about $80,000 of remodeling/improvements. I don't think it will sell above $425,000 in today's market. I just lowered my listing price from $445,000 to $435,000 on friday. My realtor is doing an open house this weekend as I write. Yesterday only one person showed up. Accounting for about $3000/year in taxes over that period, $2000/year in HOA, and perhaps $8000/year in interest (rates used to be much higher, and I had a second loan with higher rate), and the 6% realtor commission I will have to pay when it finally sells, this will be way less than break-even. Of course, it was not an investment property. I lived in the house for 13 years, and that counts for something. The cost of renting a comparable house for the last 13 years would have been about $280,000. I don't think I could have collected that much if I rented it because vacancy rates have fluctuated and have been at times fairly high.

I have little doubt that I could get a $300,000 mortgage on a property valued at $550,000, which has been in continuous rental for two decades and which is cash flow positive.

Again, I wonder how you would document your income to obtain the loan. Regardless of the value of the property and your equity, if you can't prove that you have income to pay back the loan, you will not a loan. The qualifications for loans have become much more difficult since 2008.
It used to be way too easy. Now I think lenders have gone mad in the other direction. Hard to blame them given what happened with all the subprime mess, but I hope that they will find some middle ground soon.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (51) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Post of the Day:
Value Hounds

Ubiquiti Analysis
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement