Investment Properties are Surprisingly Active Right Now

In looking at what is happening here at Franklin Loan Center, I’m seeing a surprising amount of people buying investment properties right now. We keep hearing that prices are over-inflated (which I don’t totally agree with). But with where rates are right now and other market factors, it would look like things are a little more difficult to make it work.

But, to give you an insider’s perspective: I’m seeing investors making it happen.

Two Factors for Investment Properties

There are two things with investment properties:

What is your cash-on-cash return? Are you achieving break-even or positive cashflow against the cash you have in the property?

What kind of gain are you going to sell the property for?

Both of these questions are critically important in real estate, especially for investment properties. Everyone likes to talk about the value of a house, but that only matters if/when you are selling it.

Let’s Break Down the Numbers

The numbers tell the story: let’s look at holding onto an investment property for 5 years, assuming it goes up 10% in that time. For example, you choose a $500,000 house and put $20,000 down. So, you have a $100,000 into it. You sell it for a 10% gain 5 years later – and it’s a 10% gain on the $500,000 (not the money you put in). So, you made $50,000 on $100,00, which is a 50% return on your money.

So, from a cashflow perspective: if you just broke even, you’d be in a good position.

There’s the argument that you aren’t going to break-even if you are putting 20% down here in Southern California. That might be true. But I’m seeing people put down 20 – 30%, and if you look back over the last 5 years… it’s a lot more than 10% you’ve gained in equity. The numbers can still work.

Investments are All About the Numbers

This is what I love about what we do, especially on the investment side: it’s just about a number-crunching game. You can be super objective about your decisions.

If you have any interest in investment properties: how to look at the numbers and get into the rental industry, then I’d love to talk to you. I have a spreadsheet we can use to analyze the numbers and find the best solution for your needs.

Don’t forget: there’s no doubt that real estate has created more wealth in the US than any other asset. It’s a great investment. I’m here to help you get in the game.