Lakeville MN investment property

[Conner Malrose]

Investment Info:

Townhouse buy & hold investment.

Purchase price: $185,000
Cash invested: $185,000

3bd 2th 1300sq ft 2 car garage rents for 1500-1700 a month

What made you interested in investing in this type of deal?

good ROI

How did you finance this deal?

Cash with partnets

[James Hamling]

@Conner Malrose I am super confused by this purchase, as MN REI specialist/ investor/ rei agent.

First item, the COC is "garbage". Now, that said, Lakeville isn't a COC play at this time in market, it's about equitable appreciation with good operational numbers. But when going at that play, it's all about leverage and all-cash slit's ones throat on the leverage, especially since you have maximal tax exposure on an already poor performing COC property, making COC even worse. On equitable appreciation plays, use the cheap leveraged funds, take the write off for what is, on paper, an annual net loss, and with the same cash your in control of $1m vs $2ook in appreciating assets. Not to mention with write-off's vs tax burden.

Next, I'd STRONGLY suggest mixing that portfolio for diversification with some good COC properties (MUST meet 1% rule MINIMUM). By mixing COC and E.Appreciation deals, the tax write-off enhances net profits on the COC properties, and you have a game plan in place for either tapping equity gains or liquidating to take gains (generally with 1031).

But going all cash.... at poor COC..... no leverage use..... I just don't get it, it's really not a good utilization of the capital, market or available strategies. I applaud getting "into the game" but you could and should be setup far far better than this. It's not just about all the profits (current and future) your leaving on the table but it's also about risk mitigation via appropriately structured portfolio. 10 properties netting $100mnth is 10X "safer" than 1 property netting $1k, the numbers may seem the same but it's about diversification and the law of averages. Now add on a property is appreciating at 5% annually. If you can do 1 all cash or 10 via leverage, just run the numbers, they are not even close. So via leverage you get far better returns AND more security. Hence, my confusion why you'd be traveling the significantly lessor, more risky path????