REAL ESTATE TODAY
Investment property – something to think about now
Do you have some funds sitting around in your bank account earning 0.1 percent in annual interest? That’s $100 of interest over the course of a year on $100,000. This can be very frustrating for investors. Maybe it’s time to consider investment property. Most financial planning pundits strongly suggest that real estate be part of an investor’s overall financial portfolio. Have you ever thought of purchasing income property in the Bay Area?
Mortgage interest rates continue to be low. Investment property can be purchased with a 25 percent down payment. There are a lot of positives in the market right now for investment property. Because property values in San Francisco remain strong overall in comparison to just about everywhere else, investing in the Bay Area (outside of San Francisco) may be a great alternative to the bank account example described above.
Several counties in Northern California have experienced significant plummeting of their sales prices due to the financial crisis that has occurred over the last few years. This situation presents great opportunities for investors. An investor contact of mine recently purchased a three-bedroom, two-bathroom home in east Modesto (Stanislaus County) for $120,000 cash. The monthly rent is $1,250 per month. This new owner reduced the rent from the market rate of $1,300 per month because the tenant will be caring for the grass. So on a $120,000 investment, this investor is experiencing gross income of $15,000/year. If the expenses associated with the property are upwards of 25 percent (an extremely conservative estimate), this property will still yield over 9 percent on an annual basis.
Another contact purchased two homes in Vallejo (Solano County) for $80,000 each and rented those properties for $1,000 per month. On a $160,000 investment, this investor is experiencing gross income of $24,000/year. If the expenses associated with the property are upwards of 25 percent (again, an extremely conservative estimate), this property will still yield over 11 percent on an annual basis. These properties are great examples of how to get your assets working for you. These examples are not unusual for today’s market.
Closer to home in San Francisco, investment property has come way down in price, relatively speaking, but nothing like what is happening in outlying areas.
One of the most attractive parts of owning an investment property right now is gradually increasing rents. The number of renters continues to expand as many individuals have lost their homes due to the financial crisis. Others simply cannot secure a mortgage right now to purchase a home. According to a report for the Harvard Joint Center for Housing Studies, four million more people were renting in 2010 compared to 2005. Greater demand for rental housing means investors can expect even higher rents in the future.
I strongly suggest you consider adding investment property to your overall investment portfolio now. In 20 years, you’ll be glad you did!
Mortgage interest rates continue to be low. Investment property can be purchased with a 25 percent down payment. There are a lot of positives in the market right now for investment property. Because property values in San Francisco remain strong overall in comparison to just about everywhere else, investing in the Bay Area (outside of San Francisco) may be a great alternative to the bank account example described above.
Several counties in Northern California have experienced significant plummeting of their sales prices due to the financial crisis that has occurred over the last few years. This situation presents great opportunities for investors. An investor contact of mine recently purchased a three-bedroom, two-bathroom home in east Modesto (Stanislaus County) for $120,000 cash. The monthly rent is $1,250 per month. This new owner reduced the rent from the market rate of $1,300 per month because the tenant will be caring for the grass. So on a $120,000 investment, this investor is experiencing gross income of $15,000/year. If the expenses associated with the property are upwards of 25 percent (an extremely conservative estimate), this property will still yield over 9 percent on an annual basis.
Another contact purchased two homes in Vallejo (Solano County) for $80,000 each and rented those properties for $1,000 per month. On a $160,000 investment, this investor is experiencing gross income of $24,000/year. If the expenses associated with the property are upwards of 25 percent (again, an extremely conservative estimate), this property will still yield over 11 percent on an annual basis. These properties are great examples of how to get your assets working for you. These examples are not unusual for today’s market.
Closer to home in San Francisco, investment property has come way down in price, relatively speaking, but nothing like what is happening in outlying areas.
One of the most attractive parts of owning an investment property right now is gradually increasing rents. The number of renters continues to expand as many individuals have lost their homes due to the financial crisis. Others simply cannot secure a mortgage right now to purchase a home. According to a report for the Harvard Joint Center for Housing Studies, four million more people were renting in 2010 compared to 2005. Greater demand for rental housing means investors can expect even higher rents in the future.
I strongly suggest you consider adding investment property to your overall investment portfolio now. In 20 years, you’ll be glad you did!
Jim O’Neil is a Realtor for Better Homes and Gardens Mason-McDuffie Real Estate at 2200 Union Street and has lived in Cow Hollow for the past 21 years. E-mail him at [email protected] or visit www.bhghome.com/jimoneil.
