My wife Heejin is looking at an investment property in Plano, Texas that will sell for about $510,000.
It also has a tenant in it who is paying $3,700 per month.
With 25% down, the PITI is around $2,600 – assuming a no-points loan in the 3.25% range.
Note that investors can put 20% down too, but the smaller down payment pushes up the rate an additional 1% (at least).
But even with rates in the mid-4’s and 20% down, the above property’s PITI is still only about $3,000 per month.
In Reno, Nevada, another market we are looking at, the rental market is not as strong, relative to home prices.
A $725,000 house might rent for $3,300 per month, against PITI of about $3,000 per month with 25% down.
In CA, the rental market is even weaker relative to home prices, depending on the pocket where one is buying.
But, my main point is that very low interest rates are making investment options more viable – even with rising prices.
The above analyses all assume rental rates for long-term leases involving vacant properties.
But what I really find interesting is how robust the Airbnb market remains – either despite of COVID or b/c of COVID (b/c many travelers want to avoid hotels).
I know this from firsthand experience, as Heejin has become somewhat of an expert at Airbnb too.
This is b/c she has figured out to fully furnish and supply properties on the cheap.
And more importantly, she has figured out that renting fully furnished properties commands a huge premium that more than offsets the cost of the furniture.
Heejin uses local designers (with retail licenses and wholesale discounts), floor samples and various websites like Wayfair to find very affordable options.
There are also numerous websites and links with Airbnb tips like this one. In addition, Airbnb itself offers numerous tips on its website.
In any case – low rates and surprisingly robust long-term and short-term rental markets make real estate investing an excellent alternative to the stock market.
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