I’ve been lazily pursuing some properties in the Huntsville Alabama area for the past few months and we are now closing. With all the bad news, loan turmoil, and using the large amount of inventory in the market as a sledgehammer, my realtor was able to get me a four plex for $117k (OLP: $139k).
If nothing else, all the bad news real estate is getting, I’m getting it to work for me. Now the numbers:
ROE = (CF+AP+LR+TX)/DP
ROE = Return on equity
CF = Cash flow
AP = Appreciation
LR = Loan Reduction (I usually set this to zero)
TX = tax benefits
DP = Downpayment
So details of property:
Four-unit
Gross Income: $18000/yr.
Expenses: 6,100/yr.
Notes: The seller was asking for $139k, but the comparable sales and the general orneryness of my agent got him down to $117k. The property cash flows at around $361/mo. The property is fully rented and its tenants have been there for years. Also, the property was charging below market rents, which we can now raise over the next year.
The market itself is not oversaturated with investors, so I will probably investigate getting two more. The loan turmoil has made it extremely difficult to go after larger properties (5 units and more) but I only had $25k of downpayment money to work with anyways.
Anyways, I post this to show that
a) not all areas are in the same real estate cycle
b) it is possible to go to other areas and use our “california money” to buy reasonably priced and cash flowing properties
c) how little money it actually takes (if you consider $25k as “little”)
I chose Huntsville, Alabama because it is a growing city and the military base in the city is expanding its operations. The properties have gone up some but not a whole lot and there has been a buying spree. Still, you can choose good properties in good neighborhoods (the property I chose is across the street from the military base) and the properties I looked at were cash flowing. I am scheduling a trip there hopefully within the next couple of weeks to take a look at the place, but the photos that my realtor sent me have given me a good amount of confidence in the place. My realtor is an investor/owner himself so he knew what he was doing in terms of what to get for me.
Lastly, I am not showing off, I am just posting the information because I know that some people are curious about investing in other areas. Nobody else in piggington is investing in other areas and posting about it so I thought it might be of benefit to some.
