Today we aren’t going to be talking about the theory of making the best investment in real estate and instead we’re going to talk about a real world example.  Today I’m actually going to talk about my latest investment and what the numbers look like.  In a previous article I talked about the basic investment tips that are critical to turning real estate into a high return investment and one of those tips was to get a budget and plan together and stick with it.  The reason I’m mentioned that particular tip today is because following that tip is what ended up getting me this investment and helped me avoid another property that would of been a huge headache.

I knew real estate was one of the best investments of 2009 and I was pushing really hard to buy a multi-family home to rent out during that time.  I was pushing so hard that I started to not follow my own advice and got tunnel vision on a property I was dead set on getting.  I stopped looking at the numbers are just looked at how “cool” it would be to own this property because of it’s design and location, neither are great reasons by themselves to purchase a property.  I could of got the property for around $120,000 dollars and it needed around $25,000 in repairs.  It was a nice 3 unit that would rent well, but the monthly expenses on the property were almost $3,000 because of the cost of heating, insurance, etc.  In the end my real estate agent talked to me and got me to open my eyes on how this wasn’t one of the best investment options for me.  Which brings up a great point.  Surround yourself with other people who are investing, even if it’s just your real estate agent.  It’s always harder to miss something when you have two or more people looking at it.  After moving on from that deal it was back to looking.

It took another 6 months before we found another property I thought was worth the effort.  2009 was long gone, but real estate, specifically rental properties in this case are still some of the best investments for 2010.  The new property I had found was a 2 unit for half the price of the property mentioned above, let me say that again, half the price.  It also needed very little work, I’m currently estimating around $5,000 total in repairs.  The house is in amazing shape and even has a garage and fenced in backyard for the tenants, two things the previous investment I looked at didn’t have.  The property is currently rented for $1,200 total between the two units.  If you do some rough calculating at the mortgage payment on $70,000 dollars you’re looking at approximately $400 – $450 dollars.

• $1,200 Income – $450 Mortgage Payment = $750 Positive Cash Flow

That’s $750 in positive cash flow each month.  Over $8,000 profit after a year.  If you were to put all that money back into the mortgage and take no profit every month.  You would turn your typical 30 year mortgage into a 5 year mortgage saving over $55,000 in interest.  Are you starting to see how real estate is the best investment?

Obviously this is a very simplified look at the process and costs and at the end of the day it might not be quite that great, but so what.  Let’s say I go conservative and it takes me 10 years to pay off that 30 year mortgage.  In 10 years on this property alone I’ll pay it paid for free and clear and by then rental rates will have increased so I’ll most likely be bringing in around $1600-$1800 per month easily.  The trick that I’ll even call a secret was mentioned in the first paragraph.  Take your time and set a budget, then stick to it.  That’s the secret to making real estate the best investment.

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