Does This Investment Property Make My Assets Look Fat?
October 10th, 2009 categories: Buyer Resource
How many times have we been asked a question that is so obvious, and we know what we should say. Hopefully we have never been caught in this type of trap. Perhaps David Spade said it best in tommy Boy…when Tommy asks if his jacket makes him look fat, “Richard” (David Spade) says “No…your face does.” Sometimes people just need to be told the obvious, especially when it comes to money and investment properties.
Anyway, when it comes to investment properties, you want them to make your Assets look fat…after all, we are not talking about a dress or tight fitting pants, we are talking about investment properties.
So how can you make sure your Assets look fat? Do not be stupid! Do not be greedy! As I wrote in a recent article, Impatience Is A Virtue, and you must be ready to act when the opportunity presents itself. When you come across an investment property that allows that opportunity for big cash flow, you must think about it in the long term, as it could be a life changing opportunity.
Do not let saving a little money on the purchase price of an investment property cost you a lot of money in the long run. Make sure you write an offer that assures you will have your contract accepted.
We recently had a client who was about to purchase a Sonoma County investment property and wanted to offer a little less than list price. Even when he was about to purchase a property that would cash flow between $2,100 – $2,500 per month (depending on rents, what the tax assessor values the property at etc.) he almost let this opportunity slip away over $9,000 of purchase price. Can you imagine almost letting $2,100 a month slip away over a single $9,000 payment? A payment that would have been financed at 5.5%? Crazy!
Real Estate Logic states that You Make Money When You Buy Real Estate, Not When You Sell It. This is of course true when you think about it, but if the numbers work for an investment property, then the numbers work. A wise person once told me not to stoop down to pick up a nickel while a dollar flies right by your head.
When you purchase a rental property you are purchasing the property in some respects, but most importantly you are purchasing the cash flows. Investment property prices have been cut in half, the same as other forms of Real Estate here in Sonoma County. In our experience, this is crazy, as the cash flows have only been cut 10% – 15%. This, coupled with the extremely low mortgages rates, make this a great buying opportunity for the Real Estate investment minded buyer.
As far as where prices will go…we are not sure…it all depends on new inventory that hits the market and how many buyers want to purchase. With that said, if you can buy an investment property that cash flows, you are getting paid to wait for price appreciation.
Contact us to learn more about Sonoma County investment properties.
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