This is my first post on this forum, and I need your advice guys. I’m 23, definitely a beginner in RE. The reason why I’m writing this is that I read many topics here, and the returns are sky-high compared to the ones here.
One example deal from today:
A garage sells for 6250$. Imho it is underpriced, worth ~ 8000 (this is solely based on comparison with similar garages). The strategy I’d like to follow is buy and hold (rent).
An optimistic rental price is 62.5$/month. This means a monthly 1% return without calculating any expenses. There is a 10% tax of the original price to be paid when it’s bought, there is a 25% tax on the rental fee, plus there is a fixed tax of 37.5$/year.
This equals to 6875$ investment, and calculating with 10 months avg rental/year: 431.25$/year. Still not calculating with upkeep cost, though I guess in case of a garage it’s rather negligible (tell me if not, I’m a newbie).
In the case of flats according to my “research” in the area the monthly return is also ~1%, the fees (tax) are similar, but in this case we have to calculate with the high upkeep costs, and I have no idea how it’s worth for anyone to invest in such properties.
Do you think it’s worth to invest in properties like that garage? If this is one of the best offers available, shall I skip RE business till the economy changes?
Balu,
Welcome to the REI Club!
I had a little trouble following your line of thought with the garage taxes and all.
Could you look up the “50% rule” on this forum on rental expenses?
Then see if you can write it down so we understand it. Right now that garage deal is not looking so good to me, but maybe I am missing something.
I am looking forward to your next post.
propertymanager says in a post that the property should be bought at a big discount. This is true for this garage, as its sold for 1million HUF while worth definitely more, probably ~1.5million.
The 50% rule is applicable for US residential properties as I read. Definitely it’d be a newbie mistake to deviate from it because I think in my specific case this ratio has to be better, but:
it’s a garage and not a residential property, doesnt this change the % of the costs?
Anyway, if I’m calculating with the 50% rule, the cash-flow is negative. It’s ~31$/month income to 42$/month expense.
This is a no in this case, right?
As I’ve checked the market I’m in, positive cash-flow offers (with the 50/50 rule) are hard to come by if there are any. But will look for them anyways.
That would make it negative. If you aren’t going to be making maoney from it, but going into your own pocket every month for the payment I would pass on that investment. Just keep looking for someone desperate to sell.