The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing


Subject:  Re: How much is enough? Date:  1/9/2011  5:44 PM
Author:  madbrain Number:  68180 of 100375


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.
Copyright 1996-2020 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us