Investment Property? What does "a deal" look like?

Real Estate Agent with Wolf Real Estate Professionals

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. 

Townhouse-style homesThere 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.

vaulted ceilings, oak cabinets, island top storageThat 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?

Comments (34)

Andrew Martin
REMAX Accord - San Ramon, CA

There are sooooooooo many good deals for the investor right now. With money earning about 1% in the bank or money market or CD, it's crazy not to be buying up these "good deals". I have indulged in a few myself this year, and the payback on the down payment is amazing 6-10%/year.

You don't have to care if the places are going to appreciate or not. It's about cash flow (for me, others of course are different), and the cash flow is huge right now.

If your a Realtor, and your not taking advantage or your license and the low prices and high rents, you need to kick yourself.

Nov 02, 2010 01:29 PM
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

This does look like a very good investment opportunity.  The key would be to make sure the association is collecting enough reserves so that when repairs are needed there are no special assessments.

Nov 02, 2010 01:33 PM
Chris Olsen
Olsen Ziegler Realty - Cleveland, OH
Broker Owner Cleveland Ohio Real Estate

Hi Dan -- Very true.  While there is a lot to learn for a first-time investor, the rates so are incredibly low, that it can make it worth it financially compared to say when rates were 7-8% in the past.

Nov 02, 2010 02:40 PM
Ray Mikus
Green Light Real Estate - Montpelier, VT
Green Means Go!

Dan--Good post.  I've been singing the same song for a while now.  One thing to think about is that if it's a condo association, are you going to run into limits as to the number of units that can be rented?  Or, at resale, if the association is above that threshold, will a new buyer be able to get conventional financing?  Just a thought.

Nov 02, 2010 02:41 PM
Rob Swan
Swan Realty - Red River, NM
Vacation Home Sales

You failed to mention the cash on cash return which in the case would be just over 17%. It's a nice selling point.

Nov 02, 2010 02:45 PM
Donna Paul
Keller Williams Realty Gold Coast - Dix Hills, NY
Long Island Home Specialist,All About Real Estate

thanks for sharing Don.. Everyone is looking for a great DEAL...

Nov 02, 2010 03:06 PM
Buki Burke
Ventura, California - Ventura, CA
(805)377-0236, Berkshire Hathaway Home Services CA

Good post. There are so many good deals out there now, but the psychology is so different from a market that is going up. That does sound like a deal no one should pass up. So what's wrong with it, or what's wrong with us. We don't really know a good deal until 5 years from now, when we look back and are glad we took the plunge. Thanks for sharing.

Nov 02, 2010 03:34 PM
Curt Baumgarth
Mesa, AZ

Great post about the cash flow and long term benefits of investing in a home.  Thanks

Nov 02, 2010 03:46 PM
Sonja Patterson
Keller Williams - BV - College Station, TX
Texas Monthly 5-Star Realtor Recipient for the Hou

If it is easy to obtain good tenants, then this sounds like  a sure thing.  Can't get much in the way of interest letting your money sit in a savings account, CD, or T-bill these days!!

Nov 02, 2010 03:47 PM
Patricia Regan
The Regan Team Home Loan Group - Petaluma, CA

Good Post. I think its important that people know that investors are people who can cash flow. Just because you have properties doesn't mean you are an investor. You have to have equity and the ability to cash flow on the home too. Basically, one should only invest what they can afford to lose... but hopefully that isn't the case.

Nov 02, 2010 04:45 PM
Richard Willard
Asset Realty Group - Bellevue, WA
Richard Delane Willard

The old paradigm was to buy your favorite house, hold for a year or three, and sell again to the greater fool when the market has risen, while you pay negative cash flow and interest only on your loan.  Those days are over and the street is littered with those the bankruptcies of those people who thought investing in real estate was a no brainer! 

Cash flow is the only way to measure investment in real estate, we're back to basics again.  Good post.   

Nov 02, 2010 05:04 PM
Lorraine or Loretta Kratz
Crescent Moon Realty, Inc. & Land N Sea Auctions. - San Marcos, CA
Certified Negotiation Consultants

Sounds like a good opportunity. I always hear phrases like would the seller take $150,000.

Nov 02, 2010 05:57 PM
Alex Morris - Austin Real Estate Agent
Austin, TX

Great post.  People are slowly coming back to the traditional, diverse means of investing, it seems.  Slowly.

Nov 02, 2010 07:01 PM
Bob & Leilani Souza
Souza Realty 916.408.5500 - Roseville, CA
Greater Sacramento Area Homes, Land & Investments

Dan, in my area there seems to be flurry of investors looking at homes in the $200k and less price range. They work out to be a similar scenario to the townhomes you discussed, which I think looks like "a deal" (especially if they're using money that was stagnant in a savings account, CD, etc.)



Nov 02, 2010 08:33 PM
Michael Setunsky
Woodbridge, VA
Your Commercial Real Estate Link to Northern VA

Dan, a positive cash flow is a no brainer. Good luck with your investors.

Nov 03, 2010 03:13 AM
Katie McBride
RE/MAX Executive Realty - Hopkinton, MA
The McBride Team

Dan, looks like a great property for the $.  Great, great post.  Hope it generated a buyer for you and it's already sold!!

Nov 03, 2010 04:21 AM
Marc Iafrate, MBA
Capital City Realty Team - Raleigh, NC
MBA - Wake County Real Estate Search

Dan, good post.  I've always believed in investment property, provided it is the right property and right area with high demand.  There are situations that you described in your post that certainly make sense for investors.  There are some key questions that buyers need to ask themselves...mainly, do I want to be a landlord and manage the property myself, make repairs, handle the financial aspect of renting, etc. if not, then they need to make sure that my cost structure and financial goals support the hiring of a management company.  There are a lot of opportunities out there!

Nov 03, 2010 07:06 AM

Very good information, I wish I could take two just for the fun of it.

Nov 03, 2010 10:23 AM
Simone Bercu
Metro Referral - Palm Beach Gardens, FL
Not state specific Real Estate - GRI, e-PRO, AB


Sounds very appealing.  We were about to make our plane reservation, when we realized that it is winter in Alaska.  We will wait for the Spring to travel there.

I shared it with my overseas investors.  What is the vacancy rate in Anchrage? What is the percentage of unemployment  and the median income?

Thanks for sharing.

Nov 03, 2010 11:40 AM
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct

Great blog, investment properties are wonderful if you do your due diligence first and are prepared for putting in some sweat equity. Happy New Year.

Dec 27, 2010 01:12 AM