I mentioned thru blogs that I recently sold a property. As I was sitting at the closing congratulating the 1st time home-buyers,It reminded me about when I purchased my first property in 1996.It was a 2-Family REO in Union that needed major rehab.I purchased it for $94,000 with 15% down($14,000...all borrowed) and my mortgage was 12.5 % !!! I borrowed around $25,000, rehabbed it(2 new furnaces,roof,siding,gutters,2 kitchens,2bathrooms ect..)needless to say,I busted my rear for months doing a lot of the work myself nights and weekends. I ended up refinancing it around March 1997 to pay back the loans, so I had a mortgage for $125,000 at a cheap 9% !!! I rented the first floor and rented the second floor to friends and myself. The rents collected paid for everything (my portion of the rent was $50/month).I was paying $600 that 1st year for living expenses and living for free plus making money the 2nd year. I stupidly sold the property in 2000 for $195,000.
Now, the reason I bring up this story,is to illustrate "what could've been"if I never sold the property or refinanced and kept paying at 9%.To keep this simple, I will pretend that I never moved,and all the rent increases and cashflow went to pay taxes,improvements and maintenance;
I would owe around $104,000...I could kick out my friends and have the apartment to myself,living for $400/month...The property in this market is still worth $280,000+ (In 2006 worth around $380,000) I still would have equity of $176,000 and living for under $5,000 a year !!!
Which brings me to my point;
1) The buyers of my property Wednesday paid close to retail (87% of $260K= $225K +/-)
2) They have a 4.25% 30yr fixed total payment $1,967 PITI/mo
3) They put down+ closing costs around $15,000 (money invested)
4) They could easily rent 2 apartments for combined $1,600(very conservative #, I know I'm a landlord)
5) They are living in the third apartment for $367/month + $200/mo utilities,water=$567/mo or around $7,000/year
6) 10 years from now around $172,000 will be owed
7) The 2006 Value was around $450,000, is it a safe prediction that in 10 years or by October 2020 that it'll be worth the 2006 price? That's around $280,000 in Equity
Can you see now that you can buy close to retail and retire wealthy in 10 years.
Comments
It seems that you knows Union. I have a question for you. Union the high school is not so good, and property tax is high. Comparing with Maplewood, which is better? Another thing is the high water table in both towns. I heard that it is normal to have a flooded basement in a heave raining day. Should it be a concord for an investment property? What about the flood insurance premium (3k) adding to the cost or monthly payment. I am looking at a house in UNION. I was informed it was in flood zone (used to be not categorized to a flood zone 3 years ago) . what is your opinion investing in UNION and maplewood? flood is issue?