People ask me to let them know if I see any good deals or opportunities to make money from an investment in real estate.
When the market is going up, it's hard to buy a property that you can get a positive cash flow from. I've been watching these townhouses and I think they could be an opportunity for an investor. They are appealing because they are in good condition and appeal to a broad segment of the market.
Between 1999 and 2005, a couple of builders built a hybrid condo/zero lot line in many areas across Anchorage. I have several of these listed in Briarcliff Townhomes. Basically the townhouses are attached like duplexes and each one has three bedrooms, two full bathrooms, a double car heated garage and run about 1,350 square feet.
There is an association that does exterior maintenance like snow removal and grass mowing. Owners pay their own utilities and property insurance so the dues are minimum, like $100 per month.
Because the homes are less than 10 years old, you can find them in good shape, so there isn't a lot of maintenance to do.
Here's what gets interesting. You can buy a Briarcliff townhouse for $196,500 as an non-owner occupied investor. You'd have to put a minimum of 20% cash down-payment (yeah, that's a lot of money, but remember, you're an investor). If that same money is sitting in your bank account, you MIGHT get $600 a year interest on the same money.
Yesterday, I got a cost sheet from my lender-friend. The total payment, principal & interest, taxes, dues and insurance was $1,086. I called the property management company that has been managing rentals in the area. They said the most common rent for these properties is $1,650 per month. The property manager said he can rent them up all day long, no problem.
That means a positive cash flow of $564 each month. The rental market is good and there are few vacancies. Professional managers charge between 8 and 10 percent of the rent. A small investor might save that money and do it themselves, or decide to let a pro manage the investment for you.
The idea of an investor is to buy in a market like this, rent them and let the tenant make your payment; all the while you are keeping an eye on the market. When things turn around, and they always do, then you sell the property.
This is how much of the "old money" people got their start. Simple as this example. I know people who have done this to fund their children's college accounts and other people who have their retirements set up in real estate that they will sell as they need money in their golden years. Interesting thought, isn't it?