Case Study… IN MY MARKET AREA…
In 1985 you could buy a NICE older home for about $65,000 & rent it out for about $650/mo
You put down 20%
The interest rate was 12% and discount points were about 7%.
You put down $13,000
The discount point cost was $4,550
Normal commission was 7% $4,550 (Seller paid, but it’s part of the costs)
Other costs were around 1% $650
Total: $22,750
YOUR PAYMENT WAS $534 plus taxes and insurance = $192,600 total payments – maybe break even on the income/cost but the tenant paid off the mortgage, so it’s just income after 30 yrs. A retirement plan costing $22,750 and netting about $8K/year income every year after 30 years. If you owned 30 more years you’d make a cool $240K on your $22K cash out of pocket. Not bad.
TODAY you can buy a NICE older home for about $120,000 and rent it out for about $1500/mo
You put down 20%
Your interest rate is 4% and discount points are NONE in most cases.
You put down $24,000
No discount point cost is $0
Normal commission is 6% $7200 (Seller pays but it’s part of the costs and less than 1985)
Other costs are still around 1% $1200
Total: $32,400
YOUR PAYMENT TODAY IS $458/mo plus taxes and insurance = $165,000 total payments – with about $10,000+ a year positive cash flow. After 30 years, you have $300,000 income AND you have income continuing after it’s paid off of about $18,000/year. After another 30 years total income on your $32K out of pocket is about $840,000. Better???
IT’S NOT THE PRICE, IT’S HOW MUCH DOWN AND HOW MUCH A MONTH..
