Need Some Advise Regarding My 2 Investments

[Kenneth Lim]

Hi guys, I'd greatly appreciate some advise regarding the 2 investments that I have on hand right now. I'm still a rookie, not much of a experience and I'm still learning along the way. I've read and study alot about investing on my own. I learnt how to live below my salary, put away about 50% of what I make every month on my day job and invested the money I saved.

Here goes, I rented 2 shops in a shopping mall from the landlord and paid the landlord 2 months deposit, settled the paperworks and took the 2 contracts. Due to it's prime location, the 2 shops were rented out the very next day. Till now, both shops have been rented out for 4 months on a 1 year contract.

Amount Invested In 2 Shops: USD4,300
Monthly Revenues From 2 Shops: USD1,030
Monthly Operating Cost For 2 Shops: USD750
Monthly Cashflow From 2 Shops: USD280
R.O.I: 78%

Question: According to my calculations, which I could be wrong, if 2 shops are vacant for a month, it'd take about 4 months of my monthly cashflow (USD280 x 4 months) to pay the landlord (USD1,030). Is this the way how this game is being played?

In my senerio, I treated the landlord as my bank. I meant if I were to take a mortgage from the bank to buy a house for investment, I still got to make payment to the bank every month. I understand that end of the day, I do not own the properties except the cashflow that it generates out from my initial investment USD4,300.

[Jon Holdman]

I don't understand your numbers. Are you saying you're paying the landlord $750 a month in rent and then subleasing these shops for $1030 a month? And that you paid $4,300 up front?

What was the $4,300? Prepaid rent? Deposits? Something else? You mention you paid two months rent, but that would appear to be $750 a month or $1400. What's the other $2800?

Are there any other costs associated with these shops? Any maintenance, taxes, insurance, etc? Clearly you have the possibility of vacancy, which you're concerned about. If the current tenants move out, will you be able to replace them quickly? In my area, there are LOTS of empty storefronts in the local malls and strip centers, even in the busy ones. I've watched one building on the outlot of a new, busy WalMart set empty for years now.

The 78% ROI (cash on cash return, most RE investors would call that), assumes you're taking in $280 a month on your $4300 investment. If that's correct, then this is a nice investment. If some of that $4300 is a refundable security deposit or pre-paid rent, the investment will be even nicer when you wind it down.