Back to Basics
 There are so many elaborate strategies for investing in real estate these days it can make your head spin. But sometimes it is the most basic, time-tested approach that wins the day. Buying a cheap property with high rent seems to be one of those basic strategies that is paying serious dividends right now.
Back in the November 19 newsletter, I wrote about the price earnings ratio (P/E Ratio) as a way of comparing the earnings potential and investment viability of one property to another. Essentially, the P/E Ratio is derived by dividing the annualized rent into the purchase price. We have finished renovating our second low P/E Ratio property on Faulkner Ave. in San Jacinto. The purchase price is $160,000 completely renovated with new paint, new carpet, new kitchen cabinets and granite countertops. At 2,700 sq. ft. it should rent out at about $1750, which would create an incredible P/E Ratio of 7.62 ($160,000 purchase price divided by $21,000 in annual rent). The first low P/E ratio property was on Peaceful Lane and it rented for $1575 completely renovated at a purchase price of $145,000 (P/E Ratio of 7.67). The rental market in these areas is so strong that the tenant for Peaceful Lane was identified before escrow closed.
The basic parameters we stay within for low P/E Ratio deals is as follows:
Deal Parameters
Bedroom/Bathroom Count: At least 3 bedrooms and 2 bathrooms
Square Feet: 1800+
Lot Size: 6000+
Age of Property: 2004 or newer
P/E Ratio: 10 or less
Percentage of Peak Market Value: approximately 50-60%
Appearance: Must have curb appeal
Deal Advantages
Cash Flow: Principal & Interest payment less than half the rent
Renovation: Buy "as is" or completely renovated
Property Management: Property marketed for tenant during escrow
With the market at or near the bottom, these low cost, high cash flow properties are an investor's dream. We will continue to periodically showcase these low P/E Ratio deals in this space. To learn more about our investing model, see the panel to the right.
|
LOL - Laughs OnLine
"Hey, do I look like a fish to you?"
|
Broadcasting the Scents of Spring
by Dennis Duling
I love roses, especially traditional varieties that haven't had the fragrance bred out of them. But the problem with roses is, you literally have to stop and smell them to enjoy their scent.
I have discovered and planted several plants that are capable of filling the airspace around them with their wonderful perfume and creating an olfactory wonderland in my yard in the spring and early summer. Here are some:
Champaca - A tree native to Southeast Asia with bright green leaves and small white flowers. The flowers are not particularly attractive, but even a relatively small tree, pruned to around 5 feet tall will fill the air within 15-20 feet with its glorious fragrance. Blooms spring-summer.
Citrus Blossoms - One side of my house is lined by lemon, lime and orange trees. While all of them have fragrant blossoms, the orange tree is the real star, as it fills the whole side yard and patio with its sweet/spicy scent. While the bloom period is short-lived, about six weeks, one still receives the added bonus of harvesting fruit a few months later.
Star Jasmine - Star Jasmine is the most versatile of the three, as it can be pruned as a bush, hedge or trained up a trellis. Great in or near a patio since its flowers are their most fragrant in the evening.
|
Share If You Care
Our goal with this newsletter is simple: Cover every important topic that might help homeowners and investors make more informed decisions concerning real estate. You can help in two ways:
1) Send us any articles or information you come across that might be of interest to other readers
2) Forward this newsletter to anyone and everyone you know that owns or plans to own real estate!
Sincerely,
Kwame J. Granderson
Equinaire
| |
|
Great P/E Ratio! |
Last Sold For: $342k
Purchase Price: $160k
Anticipated Rent: $1,650
Tenant Ready!
Call (626) 653-2745 for more info.
|
Equity is Power
|
|
For more information on the Equinaire Investing Model, click here.
|
Free Educational Webinar
|
|
Free Loan Modification Webinar
Learn About...
1. Getting your best deal: Five things banks won't tell you
2. Understanding your options
3. Direct to bank vs. Legal Representation
4. How to qualify: homeowner vs. investor
Date: Tuesday, May 26
Time: 6 PM - 7 PM
Register by clicking here
|
Upcoming Webinars
|
|
Be on the lookout for upcoming webinars on the following subjects:
· 2009 Market Trends
· How do I know when the market has bottomed out?
· The Granderson Composite Index
|
Need a Loan Modification?
AmeRestart Can Help
Lender: GMAC
Loan Amount $375,750
Old Int. Rate: 9.5%
Old Payment: $3,718
New Int. Rate: 5.75%
New Payment: $2,084
Monthly Reduction: $1,634
These are real numbers!
Click Here to learn more.
Call 877.619.3258
|
Newsletter Archive
|
Want to check out a previously published newsletter?
Click here to access our archives.
|
|
