For all those investing…

[Konebhar6]

12 hours ago, Peruthopaniemundhi said:

For all those buying investment homes, could you please help me about what I am missing here. 
say for instance we are buying a town home (single car garage) for $360k. 
 

Home Value: $

Down payment: $ %

Loan amount: $

Interest rate: %

Loan Term: years

Start Date:  Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 

Property Tax: $/yr

PMI: %

Home Ins:$/yr

Monthly HOA:$

$2,459.40

monthly payment 

Down payment $90,000.

typically rent for these homes will be $1800 to $2000. Eyla chusina every month min. $700 negative cash flow and it could be more based off HOA, taxes, and maintenance cost. 

so if we do a math for 5 years of investing. 
negative cash flow + maintenance cost for every year is $9000. If interest rates decrease, rents increase, then average negative flow is ~$7500. Which is ~$38,000 loss for 5 years.

Now, if the $90k used in down payment is put in bank at 5.5% rate this year and if economy is on positive mode then it may decrease, on an average for 5 years we gain $25,000. 
 

After 5 years, if we decide to sell the investment property, it may be sold for $420k, 5% for realtor commission($21k), $6k is paid off towards principal, so the total profit here is $420k-$360k - $21k = $39k is profit if we subtract negative cash flow and maintenance then the net profit is

$1k

vs 

bank interest rate profit is $25k

additionally, we have to manage tenant and go through maintenance process.

if above is all true, why all the desi people are running behind investment homes. I am I missing something?

 

 

Your calculations are good and you have selected BEST use-case. Imagine if the property rates fall in the next 1-2 yrs. Not advisable. You are late to the trend. It made sense with 3% interest rates not now. 

[phatposts]

11 hours ago, Peruthopaniemundhi said:

On the other hand a friend of mine has negative cash flow on paper but if we closely observe it’s positive net profit.

He did 15 year mortgage with 2.7 interest, paying $3400 as mortgage and rent is $2500. There is negative 900 cash flow 

but,

out of his $3400 mortgage $2000 goes to principal, which means he is making $1100 profit by adding it to principal. 
 

so the basic concept is it’s not the value of the house, but interest rate determines either we have a true net profit or loss.

that deal makes sense in those circumstances. not in the current market

[Pandubabu]

18 hours ago, Peruthopaniemundhi said:

For all those buying investment homes, could you please help me about what I am missing here. 
say for instance we are buying a town home (single car garage) for $360k. 
 

Home Value: $

Down payment: $ %

Loan amount: $

Interest rate: %

Loan Term: years

Start Date:  Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 

Property Tax: $/yr

PMI: %

Home Ins:$/yr

Monthly HOA:$

$2,459.40

monthly payment 

Down payment $90,000.

typically rent for these homes will be $1800 to $2000. Eyla chusina every month min. $700 negative cash flow and it could be more based off HOA, taxes, and maintenance cost. 

so if we do a math for 5 years of investing. 
negative cash flow + maintenance cost for every year is $9000. If interest rates decrease, rents increase, then average negative flow is ~$7500. Which is ~$38,000 loss for 5 years.

Now, if the $90k used in down payment is put in bank at 5.5% rate this year and if economy is on positive mode then it may decrease, on an average for 5 years we gain $25,000. 
 

After 5 years, if we decide to sell the investment property, it may be sold for $420k, 5% for realtor commission($21k), $6k is paid off towards principal, so the total profit here is $420k-$360k - $21k = $39k is profit if we subtract negative cash flow and maintenance then the net profit is

$1k

vs 

bank interest rate profit is $25k

additionally, we have to manage tenant and go through maintenance process.

if above is all true, why all the desi people are running behind investment homes. I am I missing something?

 

 

VT and chill 

[Pencil_Rubber]

14 hours ago, Peruthopaniemundhi said:

Ekkada vasthundhi bro $360k to $2500 rent.

there are few area which we can rent for $2,500 like Miami, VA Beach etc

[Peruthopaniemundhi]

5 hours ago, Pencil_Rubber said:

there are few area which we can rent for $2,500 like Miami, VA Beach etc

But selling price anta homes ki akkada..