basic real estate questions

[Lao Tzu]

What are the major points to want in a piece of real estate when investing long term (rest assured i wouldn't make decisions based solely on 2 or 3 posts on EF, i'm just looking for feedback. I have no money now anyway, but i like these subjects). IE, what to look for when you want to buy at $70k today and sell at $300k 12 years from now.

I would assume population growth & nearby commercial growth. But i am not sure.

Anyway, i am a total newbie at this subject, and want to look into it.

 

[Longhorn85]

steady or better-yet, growing large labor force, such as a military base, automotive plant, etc nearby.

Proximity to major urban center

favorable tax rates

buy when interest rates are low (like now)

IMHO

 

[XBiker]

Location, Location, Location.

Beside the obvious, also look for the following factors.

School districts. This is VERY important if the majority of people are middle aged and have kids.

Property Taxes.

Relative value to the rest of the neighborhood. Don't go buying the nicest house in the neighborhood. If you do, you are setting the bar and helping (to raise) the property value of those around you.

 

[thebabydoc]

For this kind of investment, dirt is the best- undeveloped, low tax burden/insurance/holding costs and no need for depreciation

Buy at intersections of PROPOSED major highways/cross-streets (as they are being built). Unfortunately, 70K won't buy dick in this area and LTV's are too high now for good leverage on investment property, especially land. Remember in real estate what makes you the $$$$ is the power of leverage in an appreciating asset.

At 7-8% annual rate of return, money doubles every 7-8 years; so $70K would be expected to be worth $140K in 7 yrs, $280K in 14. The trick is the leverage and beating the average return, as well as just "being in it" (as in "you've gotta be in it to win it")

Rental properties tend to be better if you are just starting out or don't have a huge wad to invest. Smaller downpayments (lower LTV and more leverage) and the rent role allows you to pay down your loan while the depreciation allows you to avoid taxes on "profit"- payments made towards your principal as well as any left-over "positive cash flow"

 

[MattTheSkywalker]

Just to comment on ttlpkg's post: military bases will guarantee you a steady stream of rental income, but property around them generally does not appreciate much - it is capped because of the kind of towns that surround military posts, and the relatively fixed income of the buyers (servicemembers) . However, those areas are great for rental income and low cost properties.

The problem with buying at proposed development areas is that the developer (and their friends/biz associates) already know about it, and have purchased the property. Sounds obvious but it is hard to buy "valuable dirt" anymore. (Look into it though...this is where the biggest profits are by far)

Sometimes developers can't find a buyer (ever see signs that say "will build to suit"?) and that can be extremely lucrative, but you usually need a few hundred thousand or more to play along.

I think that your best bet is to find someplace that is under development. (The houses are still being built). The developers have construction loans and usualy need to pass certain "checkpoints" (numbers of units sold, etc.) in order to guarantee the next phase of the loan from the lenders financing the construction.

In these situations, developers will offer things like "builder pays closing costs" and offer some good incentives/financing just to sell units. If you hunt around you can get some good deals that way. And have some fucking fun with this!!