Intelligent Investing in Livingston County Real Estate

Over the last few years, TLC and HGTV have featured programs dedicated to “flipping houses.” Someone would buy a distressed home, make improvements, and then sell it for a huge profit. That simply does not work here in today’s market.

This post is NOT about flipping houses.

I want to give a brief financial description of investing that does make good sense in today’s market: purchase and hold (with tenants).

With the change in pricing over the last few years, opportunity is here. Income properties actually bring income again! Here’s a realistic scenario in our area:

* 2 unit duplex in Brighton with 2 bedrooms and 2 baths on each side
* Currently listed at $150,000
* The property is purchased for $140,000
**Since this is not an owner occupied dwelling, a bank will probably require 20% down or $28,000
**A new 30 year fixed mortgage of $112,000 (plus closing costs) at 6% would mean a monthly payment of $675
**Taxes would run $300/mo.
**Insurance is $50/mo.
**Water & sewer is $50/mo.
**Maintenance is $50/mo.
**Misc. additional $50/mo.
**Total monthly expenses equal $1175
*Monthly income on each side is $675
**Tenants pay for electricity, gas, and cable
**Total monthly income equals $1350
*Positive cash flow every month is $175 or $2,100/year for year right now and more as rent rates increase throughout the thirty years of ownership

Keep in mind this is a long term investment. In 30 years the property would be paid off by the rents of the various tenants over the years. You will own the property free and clear. Even if the property only appreciates at a rate of 3% annually over those 30 years, it will still be worth just under $340,000. The initial investment of $28,000 down payment plus closing costs has given you an incredible return. Yes, you’ll need some additional updating/maintenance along the way. Let’s look at those numbers again:

* $28,000 down (now)
* $4,000 closing costs (now)
* $25,000+/- updates & additional maintenance (year 15)
* $57,000 total investment over the 30 years

Assuming the difference between revenue and expense continued at $2,100/year, income on the property would already eclipse the investment: $63,000. Income should increase throughout the years.

So in Year 30, you own the property free and clear with a value of at least $340,000 and it has generated additional income throughout ownership! If the property appreciates at an average of 5%/year, then Year 30 value is over $600,000!

Again, this is a realistic example of a property in our area. We have lists of available properties that would be similar to this scenario. Let us know if you’d like to see those properties or if you would like to schedule a private consultation to discuss real estate investing.

As I’ve mentioned in previous posts, this may just be the Golden Age of real estate purchasing in Livingston County. The smart investors are taking advantage of this market and playing the game Monopoly for real. Are you in? I have dibs on the shoe, but the dog and car are still available.
-Todd Buckley