Thursday, February 7, 2008

I'd Like Some of What They are Smoking Please?

OK, maybe I'm stupid, maybe I'm missing something here, can you folks help me see why anybody would buy this?

According to my calculations, given the current rents and this asking price, with 20% down, and esimating 5% of gross rents for maintenance and 0% vacancy, including the tax break you would LOSE $4443 per year to own this lovely duplex.

What am I missing?

(courtesy of Craigslist)

$549900 Belmont Victorian Duplex

RMLS # 8012653

Big, bright Victorian duplex in the heart of the Sunnyside/Belmont neighborhood.
Easy conversion back to single family home or live in one unit and rent the other. Lower unit has one large bedroom, one small bedroom, generous living room, and large renovated kitchen. Upper unit has two generous bedrooms and large living room. Each unit has off street parking and private storage. Laundry machines in basement. Current rents are $1195/1150. Each unit is approximately 900 sq ft. Great location right at the Sunnyside Sunflower. Just blocks for Zupans, Stumptown, and bus.

RMLS# 8012653 &8012652


rares said...

Most 'investment' properties I run into in Portland don't pencil at 20% down.

Ian said...

rares, where do they pencil out? 30%? 40%? i'd like to hear more about your experiences, online or offline.

if people have been willing to buy investment properties that don't pencil out (i.e. aren't cash flow positive) and are banking on appreciation, what happens in a market where you don't have appreciation? do values suddenly drop?

rares said...

Full disclosure: I am a licensed broker, but I don't specialize in investment properties.

However, when I've poked around on behalf of clients over the past few years, most properties on the MLS would not pencil out below 30%.

In the past few years, I don't think a lot of investors were worried about cash flow--they probably are now with values flattening, even if rents are up.

I venture to say that a large percentage of true investment property never gets listed--it's sold via private sales, investor networks, pocket listings, etc.

Ian said...

good to know. i always assumed the best deals never saw the light of the rmls, and if we're really serious about getting into investment real estate we need to work on our network. maybe this blog will help, we'll see!