Here we go again! I'll get straight to the deal instead of my philosophy because I know my investors are excited to read about this one.
We found a single family property priced at $64,000. Tax value is $109,000. So there is about $45,000 instant equity. The home needs a roof $5,000 and some sheetrock repair and paint $2,000. Property was negotiated down to $55,000. With repairs that puts the total investment to $62,000.
I cant believe this thing was sitting on the market for over 90 days! I kept second guessing this investment deal because of how long it sat on the market, but the numbers kept telling me it was a great deal.
The home is well maintained and upgraded. It's about 1700sf, and the previous owner installed gorgeous laminate wood floors, upgraded tiles, designer paint colors, and took great care of the interior of the home. We put a tenant in place immediately for $1150 per month.
Breaking down the deal:
$55,000 Cost of Property
$ 7,000 Cost of Repairs
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$62,000 Total Investment
$109,000 CAD Appraisal Value - $62,000 Investment = $47,000 Instant Equity
$47,000 Instant Equity = 75% Instant Gain. Wait, wait, wait. Say we can't immediately flip this property in today's current housing market because of the difficulty in lending. Since this price point is attactive to first time buyers lending could be a bigger issue.
So we are of course going to just rent it for 3 years until the housing market recovers to normal.
(3 Years = 36 Months)
36 Months x $1150 = $41,400 total gross rent collected
Simply put we spent $62,000 to make $41,400 in 3 years = 67% Return On Investment (ROI) on just the rent collected.
So looking forward 3 years to 2012 we predict the local housing market will be fully recovered and this home should sell for current tax value $109,000. However being the conservative I am, lets say it can only sell for $95,000 without factoring in any annual compounding appreciation to keep this simple and makes a measley $33,000.
$33,000 Sold Equity
$41,400 Gross Rent Collected
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$74,400 Gross Profit
Ladies and Gentlemen. We spent $62,000 and expect to made $74,400 in 3 years!
Check my math, that is 120% Return on Investment in 3 Years!
Here is my challenge. Im pegging this deal on my board in my office and charting it. In 3 years I will follow up with an updated article with the actual returns. Here is the beauty, this is just one investment.
I can't count how many stock tips and next big hit picks Im told about everyday. Just pick a handful of 5 of those stocks and track them for 3 years. Even more challenging pick only 1, track it for 3 years and hope for a 120% return. I picked only this 1 property. I'll report early if I can get 120% in just 2 years, but Im confident I can make more than that goal in 3 years.
How many investments have you made 3 years ago that are now double their value?
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