Guest Blogger: Mike Meena – Augusta Financial

This market is really hopping now and I know it gets scary when we get to these price points, but I do believe that this market could hold for a while and here is why. 
 

Lets say you are a first-time buyer and you buy a property with good credit and you put 3.5% down.  It’s a simple starter home and the property sells for $525,000.00.  Your payment based on today’s interest rates will be approximately $3250.00 per month.  of that $3250.00 per month, you will payoff about $880.00 per month.  So really that cost of that home is $2370.00 with no appreciation, no tax deduction, etc. 

So if you were to rent that property because you lost your job and you had to up and move in with Mommy then you could rent that property for $2700.00.  That means you have to pay $550.00 out of your pocket, but you are still ahead of the game by $330.00 per month.  So if we look at this property as an investment then you would be putting $550.00 into your investment and getting $880.00 per month on an original investment of $18,000.00. 

So with no appreciation, and no rent increases, you are still looking at a 22% return on your initial investment.  $3960 / $18,000 = 22%!  I could do the calculations and show you what it would look like as rents continue to increase and I could show you what it looks like if values rise, but in the big picture, this is a winner!