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Subject:  Re: Possible first buy Date:  7/25/2001  7:34 PM
Author:  jiml8 Number:  595 of 14356

A couple of the posts in this thread have suggested that my requirement for 50% ROI is high and therefore very conservative.

Not really. I would like to point out that I have done deals where my ROI was infinite. Since I invested nothing, any return I received was an infinite percentage return.

So let's take a quick look at a typical deal that I did a few years ago. I put up $65K to purchase a $445K property. In the first several months, I spent about $15K in repairs, but that all came out of cash flow.

I had purchased below market, and the repairs let me immediately (and fairly) value the property at $470K, for a $25K paper gain immediately. In the first 12 months, the property had a positive cash flow of $6K (after those repairs), but the depreciation for the property wiped out $13K in income, so that money was tax free and I had a $7K shelter which saved me an additional $1960 in tax. This was a hot area, so I take a 3% escalator in property value over the first year ($14K) and I paid down about $8,500 in principal. So, my $65K paid me back (cash and non-cash) $55460, for a return of 85%.

The rest of the story; a few years later (about 3 years ago) I took advantage of favorable conditions to refi the property, pocketed $90K, kept nearly the same payment, and went and bought some other things. The most recent appraisal values the property at $590K, and the annual gross rents on the place are almost $90K (was about 72K when I purchased it).

This is not the best deal I have done, although it is one of the better ones.
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