My partner and I have some cash to invest 20% down and finance the rest in and free our cash for more investments? Right now we are looking at a 99k deal in a hot area in south Florida. It’s rented for 1,100 month and hoa is 283 a month. Doing the figures we are approximating another 120 a month for taxes and 130 for insurance leaving us with a monthly cash flow of 567.00 if we pay in cash. Obviously less cash flow if we finance. We want to build equity and sell in about 6 -12 months depending on the market. What do you think?
Sorry, i meant, should we pay in cash or put 20% down and finance the rest?
Too thin
$567 per month on a $100K cash investment not near enough for me.
Minimum 1.5% per month needed.
If you have enough cash to pay then go ahead with it coz financing would mean hindrance to the cash flow.
I don’t know the Florida market, but unless it’s red-hot, your hold time is way too short. First, you talked about cash flow. Ummm…that requires a tenant. You planning on offering a 5-month lease? It’ll take you a bit of time to close. Then it’ll take you a bit of time to find a tenant. Even selling in 12 months really means a 10 month lease.
On top of that, your transaction costs will be huge. Figure at least 10% (commissions, taxes, etc.). So you’d have to sell at $110,000 in 6 months just to break even. That would require 20% annual appreciation. But presuming you want to make some money–you say you want to build equity–let’s say you want to walk away from your closing with $10,000. (Not enough in my opinion, but let’s use that number.) You’d have to sell at $120,000. That would require 40% annual appreciation to sell in 6 months. Or 20% appreciation to sell in 12 months.
Double-check your numbers.
What would you do?
wordsmth last few words summed it up quite well. Check those #s. Keep working at it though, the Florida market is very intriguing.
Cash! If you have enough of it.