About Ed Bennett Expertise Can answer most questions related to Real Estate issues as I have a degree in real estate, numerous certificates including specialties in property management. Have been involved with every aspect of residential real estate development and `hands on` restoration. I have had brokers license in 3 states. If I don`t know it, I CAN find it! Good real estate practice is NOT a late-night infomercial.
Experience Have degree in real estate; specialty/experience in property management; Certificate in Real Estate from the State of Wa.; Been licensed R.E. Broker in 3 states; Bought and sold real estate mortgages; Remodeler extraordinaire with numerous projects from foundation to roof!
Question The Las Vegas market is so hot that I'm thinking of buying a house in the north side of town for 200,000.
I should be able to rent it out at 1100/mo. With a hefty 25% down and an interest only mortgage, I stand to be cash flow positive on this place and should see some appreciation over 30 years as well.
Here's the question(s): given the above, (the house is in the suburbs and is selling at par with the comps. The house is built in '97 and doesn't need any work. 3/2 small yard, 2 car garage, etc.) does it make sense to put so much down to achieve the higher cash flow OR do I put as little down as possible and sacrifice some cash flow OR do I try to do this as a lease-option and charge more for the property to a young family that wants to own their first home but can't afford a mortgage just yet?
I will be using a property managment firm (9-10%) and have been told that the property taxes in Vegas are so high that it might wipe out my positive cash flow no matter what mortgage I get.
Thanks in advance.
Answer Jason,
My personal problem with your proposal comes in the form of the 'principle of substitution' i.e. could you achieve a higher rate of return on a different property and/or investment?
Also remember, a vacant house is 100% vacant and you have to make payments during this time. Also, time is impossible to recover as it pertains to real estate rental. Just a few thoughts.
A 50k down to acheive a cash return of what net,net,net?
Property management, taxes, insurance, and interest payments are all deductable. Depreciation is also possible.
I would suggest you look at this in its simplist form. What would be my rate of return on my down payment after considering what I would net; and could I acheive a higher, less management intensive option for a higher rate.
I would also venture that an interest-only loan would not extend for the entire 30 year term, making it necessary for you to refinance, with the associated costs involved as well.
You also say it's comparably priced to others in the neighborhood, so you're not buying at a discount.
Also, it sounds as if you're going to be an 'out of town' landlord. Am I right?
All in all I'd probably think of passing....there are other deals just around the corner
