roundcorners_IHB
New member
Ideally, we would like to buy an Irvine primary residence in a couple of years. With what ever is left over, I like to purchase an investment property in the IE. With any luck we can buy something decent with $20-$30k down; depending on lending standards; for investment properties you want to put as little down as possible, as long as it is still be cash-flow positive. IR is correct; you don?t want too much equity in investment properties. Whatever equity you gain through appreciation, you strip away systematically and put it in your next property. Being cash neutral is acceptable; as long as ALL of the expenses are factored into the equation. Other factors that I forgot to mention above is, vacancy losses, usually a percentage is used, like 3-4%; closing costs; advertising, maintenance, and taxes. With investment properties, you always need about 4% in cash reserves!
I?m always inputting crazy search criterias on redfin; such as, under $150k, 5-beds, and 3,000 sq/ft, 2005 or newer; surprisingly some properties always pop up. Some even look very nice, in a golf course tract, with a view of a man made lake in the backyard. In that case; depending on our income and expenses, I wouldn?t mind keeping it empty, and simply use it as a weekend getaway, vacation home or simply split the home as a private time-share between friends. Especially if the home is close to recreational areas such as lake Perris or some Indian casino.
The long-term strategy with investment properties is that you NEVER sell. You always want debt. Debt for an investment properties is a good thing. It means you never have to pay taxes. My mentor has this phrase; he always asks how much debt does he need ?serviced?. He will never pay those taxes because he will never sell; he will simply REFI TILL HE DIES! With any gains he will do a 1030 exchange and simply compound it into another property. To take that two month trip to Hawaii, he simply Refi a property, I?ve seen the checks he gets, $150,000 or sometimes more; it?s completely tax free.
Having debt also means that inflation is constantly eating away at your debt. He is always paying less and less in future dollars for his fixed monthly debt payments in today?s dollar.
A good way to see if an investment property is a good buy is a simple equation. It is the ?rent-to-value ratio?; it is kind of like the opposite of the gross rent multiplier. Here in Irvine and the OC; we are lucky if we get .3% rent of the home value (a million dollar SFR can rent for $3,000/month); as we all know, it is cheaper to rent than to own here. Investors are looking for at least a .4% or higher ratio; the higher the better. Some IE areas are .5%-.6%. Some parts of the country like the Gulf Coast, Austin, and Kansas City MO can go as high as .7%-.8%.
IR, I?m not sure if you are reading this; but I wonder if you or Shevy know about the ?Land-to-Improvement Ratio?; and how it?s a factor in investment properties? Again, we are comparing say; here in OC to IE; think about how land is here, where are most of the value of a property; in land or improvements? And in the IE, where is most of its value? I alluded to it once in the main post one weekend, when you were talking about investment properties in the IE. I?ll write more if you want; but think about this? Does the commodities market play into investment properties? Does, say oil prices dictate when to buy into an investment property? It took my mentor 30 years to figure that out! Let me know if you want to know the answer?
I?m always inputting crazy search criterias on redfin; such as, under $150k, 5-beds, and 3,000 sq/ft, 2005 or newer; surprisingly some properties always pop up. Some even look very nice, in a golf course tract, with a view of a man made lake in the backyard. In that case; depending on our income and expenses, I wouldn?t mind keeping it empty, and simply use it as a weekend getaway, vacation home or simply split the home as a private time-share between friends. Especially if the home is close to recreational areas such as lake Perris or some Indian casino.
The long-term strategy with investment properties is that you NEVER sell. You always want debt. Debt for an investment properties is a good thing. It means you never have to pay taxes. My mentor has this phrase; he always asks how much debt does he need ?serviced?. He will never pay those taxes because he will never sell; he will simply REFI TILL HE DIES! With any gains he will do a 1030 exchange and simply compound it into another property. To take that two month trip to Hawaii, he simply Refi a property, I?ve seen the checks he gets, $150,000 or sometimes more; it?s completely tax free.
Having debt also means that inflation is constantly eating away at your debt. He is always paying less and less in future dollars for his fixed monthly debt payments in today?s dollar.
A good way to see if an investment property is a good buy is a simple equation. It is the ?rent-to-value ratio?; it is kind of like the opposite of the gross rent multiplier. Here in Irvine and the OC; we are lucky if we get .3% rent of the home value (a million dollar SFR can rent for $3,000/month); as we all know, it is cheaper to rent than to own here. Investors are looking for at least a .4% or higher ratio; the higher the better. Some IE areas are .5%-.6%. Some parts of the country like the Gulf Coast, Austin, and Kansas City MO can go as high as .7%-.8%.
IR, I?m not sure if you are reading this; but I wonder if you or Shevy know about the ?Land-to-Improvement Ratio?; and how it?s a factor in investment properties? Again, we are comparing say; here in OC to IE; think about how land is here, where are most of the value of a property; in land or improvements? And in the IE, where is most of its value? I alluded to it once in the main post one weekend, when you were talking about investment properties in the IE. I?ll write more if you want; but think about this? Does the commodities market play into investment properties? Does, say oil prices dictate when to buy into an investment property? It took my mentor 30 years to figure that out! Let me know if you want to know the answer?
