Monthly Archives: May 2008

Should I Invest in This Market??

 
 

While introducing myself in a business class this week as a Realtor and Investment Consultant, I was asked a question almost unanimously before I could take my seat: ” Is this a good time to invest in real estate?” Because my resounding yes could be seen as a little biased, I have decided to show you the money or the numbers that is.

 

The $10,000 Investment

Which Investment is Best?

 

 

Savings @ 5.00% Return

Tax-Free Bond @ 5.00% Return

Stocks @ 10% Return

Gross Earnings

$500.00

$500.00

$1000.00

Less 25% Taxes

$125.00

$0.00

$ 250.00

Net Proceeds

$375.00

$500.00

$ 750.00

Divided by $10000

375/10000

500/10000

750/10000

 

 

 

 

% Return on Investment

3.75%

5.00%

7.50%

 

Real Estate  @ 3.50% Return

$1000 Gross Rent – $600 Mortgage Payment = $400 Monthly Profit

Annual Cash flow:                             $4800 ( $400 x 12)

Less : Property Taxes                     $2500

            Homeowner’s Insurance       $1000

Net Earnings                                       $1300

Less : 25% Tax                                  $ 325 ( Pay taxes on gains)

Net Proceeds:                                     $975 = ( 9.75% Return)

Add Tax Benefit

            Mortgage Interest         +  $1575

            Depreciation                   + $ 770  ( + $975 Net Proceeds)

After Tax Proceeds:                    $ 3320

Total Return                        $3320/10000   =( 33.20% Return)

 

So these are the numbers, a 33.20% Return. With Houston homes appreciating at an average of 3%-5% each year, investing in real estate for the long term is one of the most sound investments you could make in this market.

 

 

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