Author Topic: Case study: Investment property questions  (Read 2593 times)

perigee

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Case study: Investment property questions
« on: August 08, 2014, 03:13:03 PM »
The basics:

Family of 3

Income: $50k

401k: $30k

cash: $50K
(yeah it needs to be invested, and I've been studying all things Wall Street for the last year and have even began paper trading, but I'm still hesitant on taking the plunge)

Monthly bills: $1,000  (a bit higher in the winter and summer, and a bit lower in the fall and spring)
electricity/garbage/internet/insurances/Netflix/heat/gas/diesel/cells/etc./etc.

Food and other expenses: $1,000 (avg. monthly)
This is on the high side, because of some larger and rarer expenses, i.e. work done on the well and pump house, a couple of new appliances, additional vet visits

Residence: 750k paid for

Investment property: 750k-1.2m paid for

The residence generates enough money to pay property taxes on both places

Phew, ok now to the issues:

Would like to sell the investment property, but need to figure out the asking price.  When it was zoned single family, it was valued at about $750-$900k, now it's zoned mixed use, which makes it more valuable, but of course harder to find a buyer, and finding a buyer at the lower end was going to be an uphill battle already.

So, the question do I price it lower to sell it 'faster' or do I price it closer to it's true value and just grit and keep paying those ever raising taxes?

Also, I got a large sign and I'm going to try selling it on my own, but how long would you wait till giving in and getting an agent and giving away 3-6% in commission?

Any thoughts, advice, opinions are welcome.

waltworks

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Re: Case study: Investment property questions
« Reply #1 on: August 08, 2014, 03:47:51 PM »
If you don't even know where to start with pricing the property, you should suck it up and hire a good realtor and cough up the commission.

Second, wow! You are FI and retired (if you so desire) as soon as it is sold.

-W

perigee

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Re: Case study: Investment property questions
« Reply #2 on: August 08, 2014, 04:16:35 PM »
Actually those numbers were the range that the Realtor gave me (he gave me the research to back them up) and I did get a second opinion on them.

I'm hoping for the FI, but when I sell these places I intend to build a small'ish home (less then 2,000 sq ft) that is also very energy efficient and that means $$$, at least upfront and collect the ROI over the rest of my life.

Could you really FIRE at say 1 mil, if wisely invested (note to self: must start investing!) and having a home that is paid off?

Thanks for the advice though!
« Last Edit: August 08, 2014, 04:23:23 PM by perigee »

theonethatgotaway

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Re: Case study: Investment property questions
« Reply #3 on: August 08, 2014, 04:28:19 PM »
Actually those numbers were the range that the Realtor gave me (he gave me the research to back them up) and I did get a second opinion on them.



I'm hoping for the FI, but when I sell these places I intend to build a small'ish home (less then 2,000 sq ft) that is also very energy efficient and that means $$$, at least upfront and collect the ROI over the rest of my life.

Could you really FIRE at say 1 mil, if wisely invested (note to self: must start investing!) and having a home that is paid off?

Thanks for the advice though!


Wait, you have two properties paid off, want to sell the investment (could take a few months from your market info for buyer), and then want to build a new house (with investment money?)...what will you do with your current house?

If that's correct and you also sell your current house when your new build is finished (guessing it would be less than 500k?, what's your estimate?) Then you should def be FI if you don't have crazy expenses. 4% rule and index funds my friend. Get that money working!

perigee

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Re: Case study: Investment property questions
« Reply #4 on: August 08, 2014, 04:52:54 PM »
Yup two acreage properties paid for and yeah the build won't be cheap, so I'm thinking 500k.

I wish I was looking at a handful of months, but right now the market is pretty well balanced, though there is a shortage of rentals, so hopefully a developer wants to take advantage of that.

I've been looking at ETF's, but maybe index funds are the way to go, I'll have to reevaluate.

waltworks

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Re: Case study: Investment property questions
« Reply #5 on: August 09, 2014, 09:04:04 AM »

Yes, you can easily retire anytime even after building your new house. Period.

Unless your $1k expenses are a lot higher, you arguably don't even need to "invest" the money in anything riskier than CDs or very safe bonds.

W


Actually those numbers were the range that the Realtor gave me (he gave me the research to back them up) and I did get a second opinion on them.

I'm hoping for the FI, but when I sell these places I intend to build a small'ish home (less then 2,000 sq ft) that is also very energy efficient and that means $$$, at least upfront and collect the ROI over the rest of my life.

Could you really FIRE at say 1 mil, if wisely invested (note to self: must start investing!) and having a home that is paid off?

Thanks for the advice though!

Catbert

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Re: Case study: Investment property questions
« Reply #6 on: August 09, 2014, 11:26:11 AM »
I would get a professional appraiser who specializes in land/commercial property to determine the value.  I've never owned commercial property so I'm not sure how to find such a specialist but I'm sure they must exist.

If you don't want to list with a real estate agent then I would at least co-op with a buyers agent (i.e., pay their 1/2 of the normal commission.)  I understand how people FSBO a single family residence or duplex.  I would be very hesitant to do it on a commercial property because I think there are probably lots of additional issues to be addressed.