Investment analysis/questions?

[Peruthopaniemundhi]

Hi everyone, firstly please don’t spam this thread since I am looking for good suggestions, also I am not asking a question about I have $100k what to invest. I did some home work and analysis and has few questions. This might be a good information for many.

1. Rental property investment:

Background: say for instance we are buying a town home or single family home for $400k. To get good interest rate (6.5) and lower monthly payments we need to put 25% down and can use only 2% towards closing costs with lender, builder and realtor credits, excess will be given as cash.

sale price: $400k

down payment; $100k (25%) with 20% down payment monthly payment will be $2900 and interest rate could be 8%. So it’s recommended to put 25% down.

closing costs and escrow: $10k

Monthly payment $2400 including HOA, insurance and taxes.

expected rent: $2100

cash needed every month: $300 monthly to pay the difference + $500 annually for lawn, pest control, in total it is $4000 annually.

amortization schedule: 

if we look below calculator nearly only $2000 is going towards interest, rest all is paid towards interest. 

So, calculate cheysthae, $4000 expenses from pocket - $2000 towards principal= $2000 manamae loss lo unnamu. 

Annual Amortization Schedule

• Annual Schedule

	Beginning Balance	Interest	Principal	Ending Balance
1	$300,000.00	$19,452.18	$1,624.26	$298,375.73
2	$298,375.73	$19,343.38	$1,733.06	$296,642.68
3	$296,642.68	$19,227.32	$1,849.12	$294,793.57
4	$294,793.57	$19,103.49	$1,972.95	$292,820.62
5	$292,820.62	$18,971.35	$2,105.09	$290,715.53
6	$290,715.53	$18,830.40	$2,246.04	$288,469.46
7	$288,469.46	$18,679.96	$2,396.48	$286,072.97
8	$286,072.97	$18,519.45	$2,556.99	$283,515.99
9	$283,515.99	$18,348.21	$2,728.23	$280,787.75
10	$280,787.75	$18,165.51	$2,910.93	$277,876

say for instance, we want to sell the house after 7 years, since we are getting it for low price, house could appreciate for $500k, which is $100k gross profit, net profit is -20% taxes, -$18k for monthly payment and maintenance, net profit is $62k. 
e analysis chusthae rental property is not viable investment, because there are other ways of investment where returns are 8-10% with less hassle then managing a rental property and tenants. 

There might be an argument that this is not right time to buy investment property but with 4-5% interest rate, the same house was sold for $500k. Either we pay less interest rate with high selling price or high interest rate with less selling price it is same. 
 

Here are my questions.

1. I know many people bought investment properties, are there any bugs in my analysis?

2. Our folks are smart managing money, but e analysis summary lo we are getting an appreciation of <7% with risks. I am I missing something.

[csrcsr]

1 minute ago, Peruthopaniemundhi said:

Hi everyone, firstly please don’t spam this thread since I am looking for good suggestions, also I am not asking a question about I have $100k what to invest. I did some home work and analysis and has few questions. This might be a good information for many.

1. Rental property investment:

Background: say for instance we are buying a town home or single family home for $400k. To get good interest rate (6.5) and lower monthly payments we need to put 25% down and can use only 2% towards closing costs with lender, builder and realtor credits, excess will be given as cash.

sale price: $400k

down payment; $100k (25%) with 20% down payment monthly payment will be $2900 and interest rate could be 8%. So it’s recommended to put 25% down.

closing costs and escrow: $10k

Monthly payment $2400 including HOA, insurance and taxes.

expected rent: $2100

cash needed every month: $300 monthly to pay the difference + $500 annually for lawn, pest control, in total it is $4000 annually.

amortization schedule: 

if we look below calculator nearly only $2000 is going towards interest, rest all is paid towards interest. 

So, calculate cheysthae, $4000 expenses from pocket - $2000 towards principal= $2000 manamae loss lo unnamu. 

Annual Amortization Schedule

• Annual Schedule

	Beginning Balance	Interest	Principal	Ending Balance
1	$300,000.00	$19,452.18	$1,624.26	$298,375.73
2	$298,375.73	$19,343.38	$1,733.06	$296,642.68
3	$296,642.68	$19,227.32	$1,849.12	$294,793.57
4	$294,793.57	$19,103.49	$1,972.95	$292,820.62
5	$292,820.62	$18,971.35	$2,105.09	$290,715.53
6	$290,715.53	$18,830.40	$2,246.04	$288,469.46
7	$288,469.46	$18,679.96	$2,396.48	$286,072.97
8	$286,072.97	$18,519.45	$2,556.99	$283,515.99
9	$283,515.99	$18,348.21	$2,728.23	$280,787.75
10	$280,787.75	$18,165.51	$2,910.93	$277,876

say for instance, we want to sell the house after 7 years, since we are getting it for low price, house could appreciate for $500k, which is $100k gross profit, net profit is -20% taxes, -$18k for monthly payment and maintenance, net profit is $62k. 
e analysis chusthae rental property is not viable investment, because there are other ways of investment where returns are 8-10% with less hassle then managing a rental property and tenants. 

There might be an argument that this is not right time to buy investment property but with 4-5% interest rate, the same house was sold for $500k. Either we pay less interest rate with high selling price or high interest rate with less selling price it is same. 
 

Here are my questions.

1. I know many people bought investment properties, are there any bugs in my analysis?

2. Our folks are smart managing money, but e analysis summary lo we are getting an appreciation of <7% with risks. I am I missing something.

You are comparing the 6.5s bro from last 7 years before pandemic rates are always in 3 range , the rents have continually increased,  tge property prices astronomically increased. They took one hime equity and bought one more , you are locking the home for future hike in property price , prices increased in some areas 100% over last 7 years  and reduced 20%"percent  so still they are not underwater

Most people don't invest when market is high , they only buy primary home

[Hitman]

Simply this is not the time to buy a investment property. At this time you only buy if you to live in it. 
 

[HugoStrange]

REIT try cheyi, it might be a better option for now

[Peruthopaniemundhi]

1 hour ago, csrcsr said:

You are comparing the 6.5s bro from last 7 years before pandemic rates are always in 3 range , the rents have continually increased,  tge property prices astronomically increased. They took one hime equity and bought one more , you are locking the home for future hike in property price , prices increased in some areas 100% over last 7 years  and reduced 20%"percent  so still they are not underwater

Most people don't invest when market is high , they only buy primary home

But bro interest will never be 3% in future 10 year’s. 5% is new normal and will be normal for next 3-5 years.  So, we shouldn’t buy investment homes for next 5 years. Again like is said, if interest rates are reduced the selling price will be increased again since US is in shortage of homes..

[Peruthopaniemundhi]

1 hour ago, Hitman said:

Simply this is not the time to buy an investment property. At this time you only buy if you to live in it. 
 

It’s a double edge sword bro, either we pay for house value or pay high interest and low home price.

[Peruthopaniemundhi]

55 minutes ago, HugoStrange said:

REIT try cheyi, it might be a better option for now

Sure, thank you.

[csrcsr]

1 minute ago, Peruthopaniemundhi said:

But bro interest will never be 3% in future 10 year’s. 5% is new normal and will be normal for next 3-5 years.  So, we shouldn’t buy investment homes for next 5 years. Again like is said, if interest rates are reduced the selling price will be increased again since US is in shortage of homes..

it depnds on person bayya , some people will have cash with them , they pool money 3 or 4 parteners and buy when it is down and sell when it is up , we should analyze what is correct for us investors will always be there may be not right for us

[Peruthopaniemundhi]

Just now, csrcsr said:

it depnds on person bayya , some people will have cash with them , they pool money 3 or 4 parteners and buy when it is down and sell when it is up , we should analyze what is correct for us investors will always be there may be not right for us

Agree. 

[Sonu_Patel]

5 hours ago, Peruthopaniemundhi said:

Hi everyone, firstly please don’t spam this thread since I am looking for good suggestions, also I am not asking a question about I have $100k what to invest. I did some home work and analysis and has few questions. This might be a good information for many.

1. Rental property investment:

Background: say for instance we are buying a town home or single family home for $400k. To get good interest rate (6.5) and lower monthly payments we need to put 25% down and can use only 2% towards closing costs with lender, builder and realtor credits, excess will be given as cash.

sale price: $400k

down payment; $100k (25%) with 20% down payment monthly payment will be $2900 and interest rate could be 8%. So it’s recommended to put 25% down.

closing costs and escrow: $10k

Monthly payment $2400 including HOA, insurance and taxes.

expected rent: $2100

cash needed every month: $300 monthly to pay the difference + $500 annually for lawn, pest control, in total it is $4000 annually.

amortization schedule: 

if we look below calculator nearly only $2000 is going towards interest, rest all is paid towards interest. 

So, calculate cheysthae, $4000 expenses from pocket - $2000 towards principal= $2000 manamae loss lo unnamu. 

Annual Amortization Schedule

• Annual Schedule

	Beginning Balance	Interest	Principal	Ending Balance
1	$300,000.00	$19,452.18	$1,624.26	$298,375.73
2	$298,375.73	$19,343.38	$1,733.06	$296,642.68
3	$296,642.68	$19,227.32	$1,849.12	$294,793.57
4	$294,793.57	$19,103.49	$1,972.95	$292,820.62
5	$292,820.62	$18,971.35	$2,105.09	$290,715.53
6	$290,715.53	$18,830.40	$2,246.04	$288,469.46
7	$288,469.46	$18,679.96	$2,396.48	$286,072.97
8	$286,072.97	$18,519.45	$2,556.99	$283,515.99
9	$283,515.99	$18,348.21	$2,728.23	$280,787.75
10	$280,787.75	$18,165.51	$2,910.93	$277,876

say for instance, we want to sell the house after 7 years, since we are getting it for low price, house could appreciate for $500k, which is $100k gross profit, net profit is -20% taxes, -$18k for monthly payment and maintenance, net profit is $62k. 
e analysis chusthae rental property is not viable investment, because there are other ways of investment where returns are 8-10% with less hassle then managing a rental property and tenants. 

There might be an argument that this is not right time to buy investment property but with 4-5% interest rate, the same house was sold for $500k. Either we pay less interest rate with high selling price or high interest rate with less selling price it is same. 
 

Here are my questions.

1. I know many people bought investment properties, are there any bugs in my analysis?

2. Our folks are smart managing money, but e analysis summary lo we are getting an appreciation of <7% with risks. I am I missing something.

you are missing our the tax benefits by managing the rental properties.. you can write off .. Interest payment, insurance cost, depreciation cost, lawn maintenance and hoa.. high income people are using real estate as a time machine to minimize the tax liability. 

[Hitman]

final గా loss చూపించి tax bracket తగ్గించు కొవచ్హా 

32 minutes ago, Sonu_Patel said:

you are missing our the tax benefits by managing the rental properties.. you can write off .. Interest payment, insurance cost, depreciation cost, lawn maintenance and hoa.. high income people are using real estate as a time machine to minimize the tax liability. 

 

[pandemkodi]

One of my friend got 2 properties in 2014 and 16.

he paid 5 per down and lived in those homes for 2 yrs 

now prices appreciated almost 80 percent 

and he has net cash flow 1.5k free money and depreciation is tax deductible and interest is tax ded . So it’s just time in the market . Yeh used to pay 300 from pocket initially but rents went up , interest rates gone down so he is net +ve cash flow and equity built . He won’t sell the property but takes money by either cash out refi or heloc .

Cash out refi is money you don’t pay any tax on and you can buy another property .

even if he wants to sell he can do 1031 exchnage where you skip paying interest .  

[Paamu]

5 hours ago, Peruthopaniemundhi said:

Hi everyone, firstly please don’t spam this thread since I am looking for good suggestions, also I am not asking a question about I have $100k what to invest. I did some home work and analysis and has few questions. This might be a good information for many.

1. Rental property investment:

Background: say for instance we are buying a town home or single family home for $400k. To get good interest rate (6.5) and lower monthly payments we need to put 25% down and can use only 2% towards closing costs with lender, builder and realtor credits, excess will be given as cash.

sale price: $400k

down payment; $100k (25%) with 20% down payment monthly payment will be $2900 and interest rate could be 8%. So it’s recommended to put 25% down.

closing costs and escrow: $10k

Monthly payment $2400 including HOA, insurance and taxes.

expected rent: $2100

cash needed every month: $300 monthly to pay the difference + $500 annually for lawn, pest control, in total it is $4000 annually.

amortization schedule: 

if we look below calculator nearly only $2000 is going towards interest, rest all is paid towards interest. 

So, calculate cheysthae, $4000 expenses from pocket - $2000 towards principal= $2000 manamae loss lo unnamu. 

Annual Amortization Schedule

• Annual Schedule

	Beginning Balance	Interest	Principal	Ending Balance
1	$300,000.00	$19,452.18	$1,624.26	$298,375.73
2	$298,375.73	$19,343.38	$1,733.06	$296,642.68
3	$296,642.68	$19,227.32	$1,849.12	$294,793.57
4	$294,793.57	$19,103.49	$1,972.95	$292,820.62
5	$292,820.62	$18,971.35	$2,105.09	$290,715.53
6	$290,715.53	$18,830.40	$2,246.04	$288,469.46
7	$288,469.46	$18,679.96	$2,396.48	$286,072.97
8	$286,072.97	$18,519.45	$2,556.99	$283,515.99
9	$283,515.99	$18,348.21	$2,728.23	$280,787.75
10	$280,787.75	$18,165.51	$2,910.93	$277,876

say for instance, we want to sell the house after 7 years, since we are getting it for low price, house could appreciate for $500k, which is $100k gross profit, net profit is -20% taxes, -$18k for monthly payment and maintenance, net profit is $62k. 
e analysis chusthae rental property is not viable investment, because there are other ways of investment where returns are 8-10% with less hassle then managing a rental property and tenants. 

There might be an argument that this is not right time to buy investment property but with 4-5% interest rate, the same house was sold for $500k. Either we pay less interest rate with high selling price or high interest rate with less selling price it is same. 
 

Here are my questions.

1. I know many people bought investment properties, are there any bugs in my analysis?

2. Our folks are smart managing money, but e analysis summary lo we are getting an appreciation of <7% with risks. I am I missing something.

Good analysis and helpful to a newbie like me. Interest rates reduce any refinance chestam kada. Interest rates must fall ?

[Peruthopaniemundhi]

1 hour ago, Sonu_Patel said:

you are missing our the tax benefits by managing the rental properties.. you can write off .. Interest payment, insurance cost, depreciation cost, lawn maintenance and hoa.. high income people are using real estate as a time machine to minimize the tax liability. 

Adhi rental income tax ki almost equal avuthundhi kadha bro..?

[Peruthopaniemundhi]

38 minutes ago, Paamu said:

Good analysis and helpful to a newbie like me. Interest rates reduce any refinance chestam kada. Interest rates must fall ?

Yes. Cheystham but to refinance interest rate drop should be significant like from 6.5 to 5.0 but it is not beneficial to refinance from 6.5 to 5.5 because we would still pay closing costs at refinance. Moreover refinance cheysinappudu amortization lo more money towards interest veylthundhi..