Florida Real Estate Deal

[Nic Hill]

Afternoon all, 

I have a property I'm looking at in Florida and the numbers make sense (somewhat) Low purchase price, with high rent values. However, the land is leased at $576 per month, which apparently includes the property taxes for the year and increases 2-4% each year. Given the numbers below, would this still be considered an ideal investment? I know your COC return should be much higher, but ive also heard in BP podcast that if its a buy and hold for cash flow sometimes you will have to wait a couple years to break even due natural market appreciation. This would be my first investment. If anyone is willing to help me analyze this and what i may be missing i would much appreciate it. Definitely want to make sure im not making a bad investment, especially my first one.

Total cash needed is less than 50k

Passes 1% rule 

Fails 50% rule 

Cash flow is less than $150 and comes in at $137

ROI and Equity is -24% until year 3

Cap Rate - 7.4% 

COC - 3.4%

[Randall Alan]

Quote from @Nic Hill:

Afternoon all, 

I have a property I'm looking at in Florida and the numbers make sense (somewhat) Low purchase price, with high rent values. However, the land is leased at $576 per month, which apparently includes the property taxes for the year and increases 2-4% each year. Given the numbers below, would this still be considered an ideal investment? I know your COC return should be much higher, but ive also heard in BP podcast that if its a buy and hold for cash flow sometimes you will have to wait a couple years to break even due natural market appreciation. This would be my first investment. If anyone is willing to help me analyze this and what i may be missing i would much appreciate it. Definitely want to make sure im not making a bad investment, especially my first one.

Total cash needed is less than 50k

Passes 1% rule 

Fails 50% rule 

Cash flow is less than $150 and comes in at $137

ROI and Equity is -24% until year 3

Cap Rate - 7.4% 

COC - 3.4%

So it’s a mobile home?  While I’m sure money can be made, your “home” is a depreciating asset; whereas “real”  real estate is an appreciating asset.  

My personal suggestion is to stick to owning brick and mortar homes - which is to say one where you own the land and the house.  

Not being in control of the land brings all sorts of potential headaches… lot rent increases outside of your control; what if the seller decides to sell the land?  You are out of luck!  You’ll likely be moving your home 

But the  biggest argument is financial.  Mobile homes do not appreciate over time like real estate does.  That alone should be enough.  Banks also don’t recognize them the same way, so will not lend the same way on them.  For them it’s more like buying a car… another depreciating asset. 

all the best

Randy