niche

For a long time California Real Estate didn't make any sense for investors. However, the market is turning towards a great one for them in recent months. Going through some of my property lists I found one that gave me an idea for us Porsche-nuts.

I wish I had the time to have bought my car this way... Here it is.

House Located in Oceanside,CA
Current price: $120,000
Previous sale: $367,000
One thing that you can say about real estate is that it always returns to it's value. So whether it takes a year or ten you will eventuall have a growth of:
Future Equity: $247,000

With 20% down the payment on that property is:
Payment: $700

Rent it for: $1200

Cashflow: $500 (conservatively)

With market being so soft, I've found some decent 993 Turbos in the 55k range. If you were to go through to a place like woodside credit your payment on one comes out to:

Turbo Payment: $616 (8 years)

So the cashflow would pay for most of the payment, in time you would get the equity growth from the house (hopefully within 8 to 10 years) and that would cover any deficit in car payment and you would still have over $200k left over!

One of my clients bought a Carrera GT with similar strategies. What do you think?

No HTwo O

Your car looks great, Niche!

An eight year car loan on a 12-13 year old car? Better have gap insurance. If you can't pay cash for the car, then maybe you can't afford it, IMHO. These are just toys. A long-term home loan....that makes sense to me.

Turbodan

good or bad times, one thing never changes: ca$h is KING

niche

+1 and Ca$h is King! However, when you think about it, wouldn't it make sense to pay as little out of pocket on a depreciating asset? My client who bought the CGT has millions (with a capital M) in his bank, yet he's always looking for ways to not pay for his toys. The idea is to have your assets pay for your liabilities.

Thanks!!!

Smindustries

Do you have a link to the Oceanside property?

MarkD

ah but you are still into your asset at 20% down. That will work out over the years but by no means is this a "free turbo" on "little out of pocket"... right?
I know you know, just playing.

niche

No... it's a bank owned foreclosure, but it's very much real and available. PM if you want more info.

True, so I guess I should've said Free Turbo....eventually! I know that in reality most of us want instant gratification, but it really would be a better way to buy toys.

friar93

First, it sounds like an interesting property and one that could be cash positive

BUT, you are way underestimating the actual costs of rental ownership...estimate $5-$10k in annual repair/maintenance depending on condition of home, heating/cooling system, bath kitchen, etc. Plan on loosing 2 months every other year to turn-over/new tennants. factor in city water/sewer bills, insurance, taxes.

if you could break even and have the rental market pay for the home expenses/mortgage while the home appreciates in value over 10 years it would be a good move but dont expect to get a free turbo out of it.

niche

Actually, you could... in theory. Say you break even and have no cashflow... even like that, that particular property will eventually have 247k in equity. If you sold it, you would have enough to buy a turbo. Yes, I know, Real Estate is coming down in price, blah, blah blah.... however, history tells us that California Coastal Real Estate ALWAYS comes back up. When? Who knows... but so what the property pays for itself. Let's say Real Estate prices don't come back up...ever... well then who cares we'd all be screwed?

niche

If someone bought that property, or one like it, if you're paying that much in maintenance you're doing something terribly wrong. There's no way it would be that much... unless of course if you have multi units or have a bad management company or letting them make all the decisions freely.

friar93

True, once SOLD you would have made the $$$ for a turbo after taxes but using the extra $500/mo cash flow would not work given the other expenses. Of course real estate is a great investment, no new news there. However, owning 1 rental property is not realistically how to achieve the scale needed to really profit.

my expense estimate really is worst case and something you would budget for and hopefully do better but dont discount it(over 10 years plan to replace a roof, a heating system, windows, paint, etc....these are all $5k projects on top of your plumbing issues and other regular stuff). I assume at that price this is a very dated property that would need regular maintanance including the property maintanance(dont forget the $100/mo to hire someone to clean the place up/trim bushes, dont expect a $1,200/mo tennant to do that).

in the end the only way to achieve scale on rental properties is multi-unit....6+ unit buildings. This way your maintenance expense to cash flow ratio is much better and your risks lower. owning multiple single or 2 families can work but it really just multiplies the problems too.

niche

Very valid points. Everything is dependant on the property you are buying. This particular property it's very doable. Especially, when the going rate of rentals there is closer to $1,500 per month. I'm very conservative in my estimates... Because I know this area, sure of the results... I wouldn't be so sure if I didn't know a particular market.

V

Javier, your avatar is ..... perfect .. The more you type the more I get to look at it . Sorry for the OT.

niche

Thanks!!! You have any more pics of that Vesuvius?

V

It's gone now but here is the intro post with a bunch of pics:

https://rennlist.com/forums/showthre...light=vesuvius