St George, Utah Real Estate Blog

09/03/05

Today’s real estate numbers:

• All homes for sale on the MLS: 595
• Homes pending (under contract): 860
• Median asking price: $369,900
• Average mortgage rate: 5.23%
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A Condo a friend and I bought that provides $75/ month positive cash flow

In February of 2005 I was assisting an investor who was buying several rental properties. One of the properties that I came across was a studio condo for sale in a good area. This “no-bedroom” studio was listed for $39,500. I thought it would be a lost cause to look at it…I mean what could it look like if the selling price was $39,500!?

I was amazed to find a well cared for, cute little (287 sq. ft.) home. I called the listing agent and asked about the rent. He said that the place had been rented for $425/month. Figuring a down payment of 20% the mortgage payment came to $215/month. The homeowner’s dues were $115/month. Total payment: $330. Adding a bit more for vacancy and maintenance I knew that $50 to $75 a month positive cash flow was very likely.

I called my investor client to go look at it. She reluctantly agreed. Her main concern was how small it was. Luckily I managed to talk her into buying it. When she ran a “for rent” ad, her phone rang off the hook from renters wanting to see it! She had 5 renters show up the first time she showed it, and she rented to one of them. She was excited and happy at how easy it was to rent and how many renters called her, not to mention the positive cash flow.

Another studio came up for sale in March 2005. (See picture above) It was nicer and in a great location at the very back of the subdivision.  It was a tad more expensive, but worth every penny. A friend and I bought it and put $8,000 down. We painted it, and then rented it for $425/ month to a college girl that, so far, has always paid her rent early.

Our cash on cash return is 11.25%. Try getting that in a savings account. The studio might be worth $55,000 now, another great return. We don’t have any plans to sell it though.

Warm Regards, Don

P.S. We all learned that there was a lack of low-income rentals available. We started concentrating on buying mobile homes to help meet that need. That is another great story!