Monday, August 29, 2011
I had fun showing some condominiums last week to a couple from Boulder who were looking for investment property and found some great things. They bought a nice 2 bedroom townhome for $125,000. Putting a pencil to it, it comes out to a great investment. Here’s how it looks with the incredible financing offered today:
Purchase price: $125,000
20% down payment: $25,000
$100,000 loan at 4.5% interest, 30 year amortization: $507/month
Taxes: $795/yr or $66/month
HOA fees: $330/month
Total Cost per Month: $903
The next door unit is rented long term at $1,100/month. So, with a $25,000 down payment, they will net about $2,400 per year, which is a 9.4% return on their investment, not counting any appreciation of the asset or tax benefits of depreciation.
The secret to this investment isn’t just that the prices have come down, but also that the interest rates are so low. For every 1% increase in interest rate, the monthly payment increases more than 10%. For instance, if interest rates rise to 6.5%, the monthly carrying cost increases to $1,028 and it’s not nearly as good of an investment.
Call Cam today if you are interested in looking at some good real estate investments.