So I was talking to a few Davidson Realtors the other day. They were telling me about how investors are starting to come back into the market. Of course, I asked why they thought this was happening. One of them explained that it is a combination of things. Obviosuly the prices of homes right now are ridiculously good. And the interest rates are good too. But I wasn't aware that the number of rental properties is way down, but the demand is way up. (This must be why Davidson Property Management is currently looking for houses to rent!) If an investor has the ability to buy St. Augustine, FL homes right now, they may get a great home at a great price and potentially rent it out for a profit! I told them I wanted to write a blog on this and they told me to talk to one of Davidson's other Realtors because he had a great case study for this.
The agent told me a story that I just love! He showed a home, originally purchased for $370,000, which was listed for $240,000. (I'm not kidding about there being incredible values out there right now!) The potential buyer said she couldn't go higher than $204,000. The Realtor made the offer and the seller accepted. However, the buyer changed her mind. The Realtor explained to the buyer that this was an amazing opportunity and if she didn't want to take advantage of it - he did! She still declined to sign the offer, so the Realtor made the same offer and it was accepted.
The Realtor was kind enough to share his numbers on the transaction to illustrate how investing in St. Augustine, FL homes right now can generate income and equity. He paid just over $51,000 at closing, including down payment and settlement fees. He spent just over $2,000 on expenses, such as cleaning, yard service, minor repairs, etc., prior to renting it. He anticipates his monthly expenses, including mortgage, insurance, taxes, HOA, lawn care, pest control, rental management fee, and miscellaneous maintenance, will be $1,638. He has an 18-month lease signed for $1,875 per month. Therefore, he is netting $236 each month in cash and reducing his loan principal by $225 per month.
The combination of the cash flow and the principal reduction results in an annual income of $5,542 - or over 10% return on the initial investment of the $53,000 ($51,000 at closing + $2,000 on pre-rent expenses). Of course, he is anticipating an increase in market value of the house over the next several years too, which will increase his equity in the property. This sure beats the 1.4% return his bank was offering to renew his certificate of deposit!
I hope this example intrigues you to learn more about the potential available if you invest in real estate right now. If it did, please feel free to contact any of our agents with questions or ideas. Don't forget Davidson Property Management is looking for St. Augustine homes for rent too!
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