Straight from the Top!

There are many, many deals out there and in the Tampa area, if you use care and diligence, you will find that it can be much to your benefit to buy as opposed to rent. On the other hand, if you are an investor, the rental market is strong, prices are low, and it could be the perfect time to get into the rental property business, or to expand your portfolio if you are already in it.

Here a great example using a house that we recently sold to an investor. It was a 3 bedroom 2 bath pool home in nice community purchased as a short sale for $105,000. The home rents for $1200 per month. With 20% down and an interest rate of 5%, the principal, interest, taxes, and insurance are estimated to be approximately $785 per month. The math is simple if you are the renter, excluding maintenance, you save $4,980 per year, and that’s before you figure in the tax benefits of home ownership by deducting for interest and property taxes.

The investor purchaser had to put an additional $2500 in cash in to get the house ready for the first tenant. Do the calculations and this investment yields an initial cash on cash return of over 18%. Compare that to what the bank is paying for your money and you’ll see why so many wise investors are starting to come back into the real estate market.

If the property value were to increase by only 2% the first year you own it, the growth on your investment for the first year alone is almost 27%. If you’re a wise investor, you have your 2% increase in value the day your purchase the house. When you consider very moderate increases in rent, property taxes and insurance, and an annual 2% annual appreciation for 5 years and then sell the property, you could wind up with an outstanding Internal Rate of Return of over 19%!

If you need calculations done on any piece of property to estimate your saving by purchasing or the rate of return for an investment, please contact me.