{"id":10732,"date":"2009-12-29T20:27:13","date_gmt":"2009-12-30T03:27:13","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=10732"},"modified":"2009-12-29T20:27:13","modified_gmt":"2009-12-30T03:27:13","slug":"appreciation-is-a-luxury-invest-accordingly","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/10732\/appreciation-is-a-luxury-invest-accordingly\/","title":{"rendered":"Appreciation Is A Luxury – Invest Accordingly"},"content":{"rendered":"

Here’s an example, using real properties recently purchased by real clients. I’m gonna modify some of the numbers, but the modifications will not in any way make the bottom line better by an inch. (Worse in fact.) <\/p>\n

What if you paid $245,000 apiece for four properties, each with an annual gross scheduled income of $28,800. The renters sign year long leases, and tend to stay a little longer than two years. We’ll set the operating expenses and vacancies at just<\/em> under 40% — $10,950 a year. This results, when using currently available loans, in a negligible cash flow of less than $250 monthly — essentially a break even. <\/p>\n

The down payment used will be 20%, though I’ll use 22% for any return figures. In these transactions you’ll be credited up to 2% of the sales price for your closing costs. The first year’s cash flow will be just under $3,000 or so for each property. We’ll assume any increases in expenses will serve to cancel out any rent increases. The loans are fixed rate, amortizing over 30 years, with a 6.5% interest rate.<\/p>\n

If in five years the value is still $245,000 — what will you have gained? Of course, you didn’t invest to find yourself in a non-appreciating asset. Since your crystal ball is in the shop, we’ll just consider it your time in Murphy’s barrel. \ud83d\ude42<\/p>\n

So, what will you have gained in this scenario?<\/p>\n

  • Income tax savings of around $7,500 a year, or $37,600 over 5 years<\/li>\n
  • After tax cash flow of almost $12,000 annually, or $59,800 over 5 years<\/li>\n
  • Principal reduction of just over $50,000 over 5 year holding period<\/li>\n<\/blockquote>\n

    It took about $54,000 +\/- to close each of the four purchases, meaning you’ve invested a total of $216,000. In 5 years without values increasing, here’s what happened. <\/p>\n

    Add up your 5 year total for tax savings — $37,600. Your after tax cash flow for the same period is a couple hundred less than $60,000. What that means to you is simple. Your Levi’s garnered just under $20,000 ($19,520) annually in spendable cash. That’s an after tax cash on cash return of roughly Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

    Here’s an example, using real properties recently purchased by real clients. I’m gonna modify some of the numbers, but the modifications will not in any way make the bottom line better by an inch. (Worse in fact.) What if you paid $245,000 apiece for four properties, each with an annual gross scheduled income of $28,800. […]<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,28],"tags":[],"class_list":{"0":"post-10732","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-investment","7":"category-retirement","9":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":10037,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/10037\/capture-appreciation-and-cash-flow\/","url_meta":{"origin":10732,"position":0},"title":"Capture Appreciation and Cash Flow","author":"Cooksquared","date":"October 12, 2009","format":false,"excerpt":"The advantage of investing in today\u2019s market is the potential to capture appreciating assets that provide strong cash flow. These investments are the holy grail of real estate investing. In strong markets, these properties simply don\u2019t exist, but in down markets, a smart investor can pick out these diamonds among\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1245,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1245\/wow-you-saved-4%c2%a2-a-gallon-whatre-you-doing-with-the-60%c2%a2\/","url_meta":{"origin":10732,"position":1},"title":"Wow! You Saved 4&162; A Gallon? What’re You Doing With The 60&162;?","author":"Jeff Brown","date":"April 2, 2007","format":false,"excerpt":"Now I'm not talking about the student or the guy with four kids, a mortgage and $98 in savings. I'm talking about the majority of people. It's a phenomena that translates into real estate investment on a huge scale. But first, let's look at what I call the 4&162; savings\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":8815,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/8815\/8815\/","url_meta":{"origin":10732,"position":2},"title":"The mortgage situation for nonresident buyers","author":"Phil Hodgen","date":"June 8, 2009","format":false,"excerpt":"Tom Vanderwall chimes in here on BHB regularly and helpfully about the mortgage situation. I look forward to his interpretation of the spins we get from DJ Bernake and crew. I handle foreign real estate transactions and here's what I'm seeing right now. What follows is all buyer-side stuff, because\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":155,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/155\/how-to-turn-100-into-27000-in-eight-years\/","url_meta":{"origin":10732,"position":3},"title":"How to turn $1.00 into $27,000 in eight years . . .","author":"Greg Swann","date":"July 29, 2006","format":false,"excerpt":"That sounds like a late-night TV pitch, but it's actually possible in residential real estate. Housing is distinct from other investment vehicles in important respects. Unlike securities, real estate is a hard asset with an enduring intrinsic value. There are huge tax benefits accruing from owning real property, either as\u2026","rel":"","context":"In "Marketing"","block_context":{"text":"Marketing","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/marketing\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":964,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/964\/964\/","url_meta":{"origin":10732,"position":4},"title":"Touchdown in Greensboro: What makes a good investment?","author":"Cooksquared","date":"January 29, 2007","format":false,"excerpt":"The rubber has finally hit the road. After a lot of researching, speaking with agents, and working with mortgage brokers, I finally touched down in Greensboro. Armed with financial models, a few perspective properties, and a lot of appointments, I set off to find a good investment. Today, I want\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1578,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1578\/buying-foreclosure-properties-dont-be-the-early-worm\/","url_meta":{"origin":10732,"position":5},"title":"Buying Foreclosure Properties? Don’t Be the Early Worm…","author":"Cooksquared","date":"June 25, 2007","format":false,"excerpt":"The old adage \"the early bird gets the worm\" points to the advantage of being first to market. But, has anyone ever thought about the early worm, clearly he was not so lucky. Many of the people who are jumping into the foreclosure market now may be the early worms.\u2026","rel":"","context":"In "Blogging"","block_context":{"text":"Blogging","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blogging\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/10732","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=10732"}],"version-history":[{"count":3,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/10732\/revisions"}],"predecessor-version":[{"id":10737,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/10732\/revisions\/10737"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=10732"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=10732"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=10732"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}