Investment Properties Produce Cash Flow

Colin Delaney January 5, 2011

Costa Mesa Duplexs Can Produce Great Income

How do you profit from real estate? You should know that Investment Properties Produce Cash Flow.

I’ve had several calls this week after I wrote a post about how one of my clients got a smokin’ good deal on their purchase of a triplex a few weeks ago, so I thought I would examine why there are good buys with investing in Costa Mesa right now.

To start with, much of what is producing the idea of investing in this type of Costa Mesa real estate has to do with interest rates. Rates are currently near all time lows as many people know. That works two ways – firstly, an investment in a savings fund is producing scant amounts of return. returns for most savings vehicles are below 1% right now on cash. That will only change as interest rates creep upwards. The second way interest rates work to your benefit when they are low is that you can get an affordable mortgage on Costa Mesa. Interest rates currently at this writing are about 5% on an investment property. How does that work in your favor? Interest rates at this level will significantly decrease your monthly mortgage payment which will produce a higher return if you were to buy an investment property.

Trust me, I’m not a finance or data geek, but look at how the numbers look (using round numbers):

Property Price: $500,000
Mortgage Rate: 5%
Loan Amount: $400,000 (20% down)
Mortgage payment: $2147
Approx. Taxes Monthly: $468

Now let’s look at rental rates. Most duplexes in Costa Mesa will rent for about $1200 per smaller unit (900 sq. ft), and upwards toward $2400 per month for a larger unit(2000 sq. ft). Working with those numbers, a smaller duplex would get you to cash flow neutral after you consider property taxes and other small expenses of holding the property. Focusing on the larger unit, you would recognize about $2185 in monthly positive cash flow. Great investment compared to a savings account producing less than 1% interest, huh?

My example is for illustration, and it might be hard to find a duplex as low as $500,000 in Costa Mesa right now. But! There were a few in the mid $500,000s last year, so you can definitely make something like this idea work.

Curious about exploring this idea? Call Colin Delaney at (714) 743-9882 or [email protected].