Another Perspective on Real Estate Investing

by Mr. Cheap

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I’m a big fan of listening to different people on a subject, considering what they have to say, then making up your own mind. Violent Acres (a really funny, evil blog!) recently posted an article “Formula For Calculating the Profitability of a Rental Property“. Its definitely worth reading over for anyone who’s interested in real estate investing.

I think her approach of working out market rent then working backwards from there in order to determine a “fair price” for a property is great. My gut reaction would be the $50 / month / unit profit is on the low side (it wouldn’t take much to get $50 in unexpected costs or miscalculations), but she seems to acknowledge that there’s actually a potential for profit in some of her other factors (such as assuming 1 month per year vacancy, increasing equity, tax write-offs and increasing rents). Also the $50 profit seems to be “cash in your pocket”, whereas I prefer to consider it “equity + cash in your pocket” (paying down a liability is as good as saving in my book).

Great post, great ideas and definitely something worth reading (and re-reading if any part doesn’t make sense) if you’re thinking about getting into real estate investing.

Canadian Dream originally posted a link to this and helped me re-discover Violent Acres (thanks!).

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Welcome to Money Smarts! If you're new here, please read the "About" page to find out more about this site. If you would like to receive updates by email then sign up here or you can subscribe to the RSS feed. Thanks for visiting!

{ 1 comment… read it below or add one }

1

I just checked out a few of the VA real estate posts.

Brilliant!

Thanks for the link,
Mike

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