Tag Archives: Investing

New to investing – the terms you should know!

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These are pitched as terms for ‘newbies’ but I’d add they are terms every investor and homeowner (as potential landlords) should be familiar with.

The first step in your real estate venture should, in my humble opinion, be education! I know it’s cliche but knowledge is power.

BiggerPockets: 16 common investing terms

Looking to buy or sell in Colorado Springs, I’d be honored to earn your business! Call Rob @ 719-440-6626

From the inbox: why is the rent so high?!

This is one that I’ve been asked a bunch of times!  It’s a good question and one that bears repeated asking.

Short answer: property and mortgage values and cash flow.

Longer answer: it’s a function of the dymanics of the city. As a landlord myself, here’s the analysis/format I use in looking at this. If you want to buy a $150,000 home, as an investment, you need at least 20% down. Let’s assume $1000 a year in insurance and another in taxes.

For investment purposes then, this home is going to cost a $30,000 down payment and at a 4.5% APR, cost a landlord $777 a month to pay principal, interest, taxes and insurance.

A landlord is going to need cash flow, too, to be prepared for emergencies and have a return on their investment. In this case, that $150,000 3 Bed, 2 bath home may rent for $1000-1150.  The landlord is “cash flowing” about $223-373 in this case.  However, that does not account for their costs any time anything breaks.  This isn’t profit for the landlord, necessarily, as there are taxes and maintenance of the home involved, too.

It scales from there…a $175K home requires a 35K down payment (as an investment property) and costs $878 a month to carry in this scenario.

LARGE CAVEAT: This is for a 20% conventional loan, investment property. An owner occupied home will require much less down but have a higher overall mortgage as a result.

Looking to buy or sell a home in Colorado Springs? Please call Rob at 719-440-6626 or email me at robthompsonrealtor@gmail.com.

*This is not legal or financial advise just sharing information and experience.  Always consult a CPA, lender or attorney as needed.

From the inbox: What’s a good source that gives me a general rundown on real estate investing?

Good question! This question is a follow on from this post “you mention ‘cash flow’ investing….”

Probably the best general rundown I can recommend as a good starting point is this podcast from Bigger Pockets: The Ultimate Beginner’s Podcast for Real Estate Investors. I am a huge fan of these podcasts and this forum has helped me personally prepare for my investment journey.

From the inbox: you mention “cash flow” investing in rentals a lot, what does that mean?

Good question! In our city, we have somewhere around a 96% occupancy rate for rentals (I have heard it quoted as -1% but haven’t been able to validate that yet). This represents a great opportunity to invest in ‘income’ property here (I hope to buy at least one quadplex personally soon).

When I mention “cash flow,” I am specifically talking about the difference between the mortgage on a home and the rent it brings in. For example, a 3 bedroom, 2 bath home in Colorado Springs rents for – on average – $1100. What if you could buy that home with a mortgage of around $800 taxes and insurance included, then rent it out? The spread would be $300. Assuming a $20,000 downpayment, the ROI (Return on Investment) would be 5.5% a year gross. That’s MUCH better than a checking or savings account generates.

What if I don’t have $20K, you may be saying? That’s okay; there are other options from owner occupied quadplexes to partnerships and more.

Questions? Email me at robthompsonrealtor@gmail.com or call 719-440-6626.

Also, check out Bigger Pockets “Buying Rental Property.”