Where to invest about $200,000?

ILOVENICKICAKES

ILOVENICKICAKES

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Apr 1, 2012
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Basically, how much money could you make with $200,000 in 1 year?

This is what my dad and I are thinking:

1. We look for 5 houses priced around $300,000 in decent neighborhoods.

2. Put $40,000 down for each of them (thereabouts, find quality non traditional lenders that work with investors - mostly online I think).

3. So now we have secured about $1,500,000 worth of real estate for $200,000. Traditionally, it appreciates at 5.9% yearly (stats taken from 1963-2008). So basically, the $1.5 million grows by an extra $88,500 that year. Not to mention the rent which should be able to cover the mortgage + a lil extra.

That's a pretty fucking decent return on $200k, more than most people make and it's way safer than gambling with it online and shit. Plus we could keep doing it for 20+ years and just build up a pretty big portfolio.

What do you guys think. I'm pretty nervous about try any affiliate schemes online but shoot anyway.
 


If you're renting you need to figure in maintenance, insurance, taxes, up keep, etc .. Its not like you can just set and forget those houses and expect income. Fortunately the middle class is dying and will probably be renting for the rest of their lives so you'll have no shortage of customers.

On a side note, I wouldn't go for "decent neighborhoods." I'd go more lower end/middle class. Blue collar homes.
 
cheshire said:
If you're renting you need to figure in maintenance, insurance, taxes, up keep, etc .. Its not like you can just set and forget those houses and expect income. Fortunately the middle class is dying and will probably be renting for the rest of their lives so you'll have no shortage of customers.

On a side note, I wouldn't go for "decent neighborhoods." I'd go more lower end/middle class. Blue collar homes.
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True. Ugh, that's actually part of the reason I was thinking higher end homes. If not we'd likely have to have a property manager for all the houses (pay them off with what's left of the rent if that's possible). Just the thought of being woken up at 4am because of a broken toilet makes my brain hurt.
 
Lastly, I didn't even mention the equity buildup. $300,000 at 6% for investors with good credit = $1,800 a month (thereabouts). However looking at amortization tables, that comes to about $300 a month principle paid for the first year. *5*12 (5 properties, 12 months) = $18,000!!

So the total profit after 1 year from $200,000 (pretty much guaranteed) is $106,000!! Seriously that ain't bad at all. And it's virtually risk free.
 
You're trolling, I suppose, but no lender is going to approve you for five $300k mortages if you can only show $200k in liquidity. Gotta have money to make money.
 
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Walk into your local convenience store with 200,000 $1 bills, and ask for 200,000 lottery tickets. Sure winner!

And I've never done real estate investing before, but I know it's NOWHERE close to as easy as you mentioned.
 
Not sure how it would be risk free.

What if for some reason people can't make rent, you have 2 houses that are empty. Your property value goes up, so your insurance does, taxes etc.

I haven't seen the area you are listing but noting appreciation up until 2008 also leaves out that there has been a recession that has hurt a lot of real estate values.

Not always a bad thing as you can factor in a higher appreciation of the property value, once/if the recession impact is lessened in your area.



ILOVENICKICAKES said:
Lastly, I didn't even mention the equity buildup. $300,000 at 6% for investors with good credit = $1,800 a month (thereabouts). However looking at amortization tables, that comes to about $300 a month principle paid for the first year. *5*12 (5 properties, 12 months) = $18,000!!

So the total profit after 1 year from $200,000 (pretty much guaranteed) is $106,000!! Seriously that ain't bad at all. And it's virtually risk free.
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accord96 said:
Not sure how it would be risk free.

What if for some reason people can't make rent, you have 2 houses that are empty. Your property value goes up, so your insurance does, taxes etc.

I haven't seen the area you are listing but noting appreciation up until 2008 also leaves out that there has been a recession that has hurt a lot of real estate values.

Not always a bad thing as you can factor in a higher appreciation of the property value, once/if the recession impact is lessened in your area.
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I know for a fact I can rent them out fast. I'm doing selling real estate leads now actually and it's easy. Yeah it really depends where in the country you're looking at. Some places are on the rise, and even in my city it's only some areas that were hit the hardest.

To others:

Well what's the fucking problem then smartasses? I looked up lender policies, not many but a few will allow you to do it with low liquidity/less than 50% of the total property values. But not everywhere in the country either so there's that. That's about the only snag I can think of.
 
ILOVENICKICAKES said:
Well what's the fucking problem then smartasses? I looked up lender policies, not many but a few will allow you to do it with low liquidity/less than 50% of the total property values. But not everywhere in the country either so there's that. That's about the only snag I can think of.
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Maybe 1 house, maybe. But 5? Good luck finding funding, especially in this market.
 
Risk free as in:

Taxes, People cant pay rent, angry people who cant pay rent destroy your property, you cant find someone willing to rent, irs makes some bs up and takes your houses, housing market fucks up and your 300k property is now worth 25k, the property management firm fucks up, among a dozen other problems you can and probably will run into?

Not to mention the fact that you want to finance 5 300k properties with 200k which is laughable. If that was possible, why not take out a 1,5M loan and put it in private banking. Would make 225k a year.
 
cheshire said:
If you're renting you need to figure in maintenance, insurance, taxes, up keep, etc .. Its not like you can just set and forget those houses and expect income. Fortunately the middle class is dying and will probably be renting for the rest of their lives so you'll have no shortage of customers.

On a side note, I wouldn't go for "decent neighborhoods." I'd go more lower end/middle class. Blue collar homes.
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so maintenance and up keep are two different things?
 
ILOVENICKICAKES said:
True. Ugh, that's actually part of the reason I was thinking higher end homes. If not we'd likely have to have a property manager for all the houses (pay them off with what's left of the rent if that's possible). Just the thought of being woken up at 4am because of a broken toilet makes my brain hurt.
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Believe it or not high end houses are going to eat you up. The tenants expect more because they're paying more and it's a "nice" house. A little drip from faucet will have them calling you at 6am. Does the garbage disposal make a funny noise? Phone call. Is the fence turning gray from the weather? Phone call. Then god forbid you have to replace a roof or A/C unit on a large house. The repairs can easily get into the $XX,XXX range.

Lower income renters don't want you in the house, they don't nit-pick things and a lot of times their handy so they just fix shit. Plus all repairs are cheaper.

Either way you're going to have to have someone to manage it. Expect 10-15% of monthly rents unless you do it yourself.
 
Mugshot said:
so maintenance and up keep are two different things?
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By upkeep I mean things like landscaping, replacing air filters on HVAC units, light bulbs, re-painting, carpeting, etc. after tenants leave. By maintenance I meant things that break on homes like HVAC units, sprinkler systems, water heaters, etc ...
 
with this economy, how many people are renting a $300K house? If it was easy every one would do it. What if the ac goes out 1 house or all 5, probably looking 5-10K each to fix it.

If you are so sure your plan is golden, why not try 1 house and then in a year duplicate it. Learn the business, get a better idea of what it means to be a landlord, and then banks will be more willing to give you money.

You can definitely make money in real estate, but investing is still gamble.

Good luck with whatever way you go
 
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