Are you ready to be an Real Estate Investor? It's Possible!

There is a silver lining in the current Real Estate market that is starting to peak through the clouds. If you have ever thought about taking the steps to become a Real Estate Investor there are some excellent opportunities currently available in South Orange County that have not been available for years. Below is a simplistic, real estate investment example for the first time investor.

Assume you are purchasing a 2 bed/2 bath condo in Rancho Santa Margarita (yes, at the time of publishing this home is available) at $241,000 and you have 20% to put down and you will be utilizing a 30 yr. fixed at 6.5%

• Sales price = $241,000
• Down Payment = $48,000
• Loan Amount = $192,800

Estimated Total Monthly House Payment

• Principle & Interest = $1, 218, 63
• Taxes = $255.00
• HOA Fees = $256.00
• Total = $1,729.63

Rental Factor:

• Estimated Monthly Rent = $1350.00
• Estimated Negative Cash Flow = ($330)
• Appreciation Factor 5% x 5 years - Sale price of $309,300

Profit Scenario:

• $309,300 Estimated Sales Price
• $(21,650) Estimated cost of sale at 7%
• $287,650 Net Proceeds
• $(180,480) Estimated Loan Pay-off
• $107,170 Net Sale Proceeds before Taxes
• $(6,275) Estimated Capital Gains tax at $15%*
• $100,895 Net Cash Out
• ($53,200) Cash Investment - $48,200 Down + $4820 Closing Cost
• $47,875 Net Profit

Return: Divided by $53,200 Cash in - 90.3%

Annualized Rate of Return: $53,020/5 = 18.1%

You may be thinking not in this market when it comes to appreciation but let's not forget historically what percentage homes have appreciated at. In Orange County, for the last 39 years the average appreciation has been over 7%. Of course some years are better then others, but when you are considering getting into real estate investment you want to buy low and that opportunity has not been available in the county for the past few years.

More importantly if you want to become a true investor then there is one characterastic that you must have and that is Patients. When you look out five years the picture is totally vs. focusing on the immediate return. You must remember Real Estate is a value asset, which allows an investor to invest little (down payment) yet your return builds based on the value of the property.

Now there are several other aspects of investing in real estate that can even make this more attractive, which include additional tax write offs, deprecation, etc and we went fairly conservatively with the loan amounts and rental figures above. Our goal here is to provide you with a simplistic view of what to consider. A prudent investor should independently verify the data and proceed only after consulting an attorney, accountant or financial planner of the buyer's choice.

Kelly Turbeville is one of South Orange County premier Realtors® focusing in the Saddleback Valley and the communities of Lake Forest, Portola Hills, Foothill Ranch, Trabuco Canyon, Mission Viejo and Rancho Santa Margarita. Whether she's helping a first time buyer accomplish the goal of homeownership, or coaching a homeowner on how to use their equity to step up into a nice home or use it to buy an investment property or finding exclusive properties for the high end consumer. Kelly is committed to making it happen. So if you're considering selling or buying a home in Saddleback Valley, call Kelly to schedule a free consultation. Whatever your dream, with Kelly at your side, It's Possible!

The above information is provided as a courtesy and is deemed reliable but not guaranteed.