By Sandra Nickel
In 1984, I bought a townhouse in Woodley Park. Ever since then, the tenants have been making my payments by paying me rent. Sure, I have had to invest a few dollars along the way, but not much. Probably not over $5,000 total. If I sold the property today, I’d clear about $35,000. That’s a 700% return on my $5,000. Where else could I have made such a tremendous profit? Nowhere that I know of!
Midtown is full of great deals right now. For example, on Boultier in Old Cloverdale a 3 bedroom 2 bath home is offered at $99,900. It would rent easily for $900-$1,000 per month. Then there’s the house at 2133 Felder Terrace, also in Old Cloverdale, on the market at $100,000. It has rented in the past for $800 and the garage apartment out back brings $400 per month.
Midtown Montgomery residents wanting to invest in a property can obtain financing today at incredibly attractive rates—in the vicinity of 4% for a 15-year loan. Assuming a 20% down payment on that $100,000 house, the payment would be $591.75 for loan repayment and not more than another $200 per month for tax and insurance. Call it a total payment of $800 and rental income of $1,200. Even with money set aside for future repairs and vacancy and 10% of the rent paid for a professional property manager, the 2133 Felder Terrace house would still produce a positive cash flow each month AND would be paid off by tenants!
Imagine having a $100,000 paid-for house today. Wouldn’t that make a dandy dent in the cost of educating your college-age child! Or how’s about adding another $100,000 to your retirement funds…or your “trip around the world” fund…or whatever?
“But,” you say, “I don’t have $20,000 lying around for a down payment!” Good news here: you may have untapped resources. You can borrow from your 401k plan or a life insurance plan with cash value. Or how about getting those doting grandparents to partner with you, putting up the down payment as a “gift” that could then be repaid when the investment property is sold as Junior gets ready for college?
The point is that real estate is the only big-ticket investment you’ll ever be able to own that some else (tenants) will “buy” for you. Not stocks, not bonds, not mutual funds—only real estate. And the climate in Midtown Montgomery is perfect right now for you to chalk up a truly great buy on an investment property. Next time I’ll talk about how you can come out even better by being willing to get your hands dirty. Until then…
Sandra Nickel has been listing and selling residential real estate for over 29 years, most with an intense focus on Montgomery’s Midtown neighborhoods. Sandra serves on the Mid-Alabama Coalition for the Homeless, the Cloverdale Business Coalition, Historic Southview, the Volunteer and Information Center, Landmarks Foundation and her own neighborhood Garden District Preservation Association.