Hi everyone,
I’ve been mulling over this real estate investing option and I’m trying to figure out what the drawbacks are b/c it sounds fairly good from what I can tell.
The investing is through a real estate investment company that does analysis and finds properties to present to investors...
• They find the property (usually a new condo development), mark it up and the investor purchases through them.
• Then there is a management company that charges from $25 - $45 a month to take care of all the landlord duties. There is also some protection offered against vacancies.
• The properties typically cost $100K so usually you have to come up with $25K for the down payment to make it cash flow positive.
So obviously you pay a premium to have the company find what you would hope is a solid investment, then there’s also paying the monthly fee (I believe the fee could be tax deductible though).
I was thinking I could use my HELOC to come up with the down payment. So I’d be 100% leveraged but all interest from the HELOC and the mortgage would be tax deductible. After 25 years the mortgage has been paid by the renter (other than the original HELOC balance), the property would have appreciated in value by what you would hope would be a 2% or so each year and you’d still have the residual income from renting the property.
Can anybody point out any potential risks or flaws in this strategy? From what I can tell the biggest risk would be remaining cash flow positive in the early years after covering all interest costs.
I’d really appreciate any thoughts – good or bad
Thanks,
Tbone
I’ve been mulling over this real estate investing option and I’m trying to figure out what the drawbacks are b/c it sounds fairly good from what I can tell.
The investing is through a real estate investment company that does analysis and finds properties to present to investors...
• They find the property (usually a new condo development), mark it up and the investor purchases through them.
• Then there is a management company that charges from $25 - $45 a month to take care of all the landlord duties. There is also some protection offered against vacancies.
• The properties typically cost $100K so usually you have to come up with $25K for the down payment to make it cash flow positive.
So obviously you pay a premium to have the company find what you would hope is a solid investment, then there’s also paying the monthly fee (I believe the fee could be tax deductible though).
I was thinking I could use my HELOC to come up with the down payment. So I’d be 100% leveraged but all interest from the HELOC and the mortgage would be tax deductible. After 25 years the mortgage has been paid by the renter (other than the original HELOC balance), the property would have appreciated in value by what you would hope would be a 2% or so each year and you’d still have the residual income from renting the property.
Can anybody point out any potential risks or flaws in this strategy? From what I can tell the biggest risk would be remaining cash flow positive in the early years after covering all interest costs.
I’d really appreciate any thoughts – good or bad
Thanks,
Tbone