Straight from the Top!

I just ran the numbers on a house for sale to be used as residential investment property. The offer is $100,000 with 20% down and the balance financed at 5%. I plugged all the information into an Investment Analysis Program that I wrote a few years ago, but haven’t used again until recently because I stopped buying when the bubble started to form.

Using some very conservation assumptions, including deducting the cost for a professional property manager, it still has an estimated yield of over 20% Cash on Cash Return, and also over 20% IRR! The investment market is absolutely back. We expect lots of REO and short sales to continue to come on the market for 2012 and 2013. The wise investor will be patient and watch and wait for the right property. You have to know your numbers to be a good investor, don’t chance it. Study the rental market as well as what sells. Two things have to be right for an investment to be good; income and expenses. Expenses can be affected by a lot of factors you may not pick up on right away if you are an “outsider”, such as CDD’s and insurance issues, as well as maintenance issues if it’s an older home.

If you are going to invest and make sure your agent understands and can assist you in determining Cash on Cash and the IRR, and you need to understand it yourself for investment comparison purposes.

I want to wish you all a Merry Christmas, a Happy New Year, and good luck on selecting your investment properties in 2012.