All Forum Posts by: Jay Mani

Thanks, Bertt.

What return do you typically look at for a rentals?

Also, since this property is close to silicon valley in Fremont, CA, I'm hoping break even is okay since appreciation will give me return.

Looking to buy rental property. Here are the specs.

Condo in Fremont, CA

List price - 450K

HOA - 300

Expected Rent - 2000

Initial expense - new carpets, paint

Financing possible at 75% LTV. My options are 10/1 at 3.25 or 7/1 at 2.9

What are ways to evaluate above deal? How can I do comparative against area?

Kiran K Can you help me do the math? Also, how do u prove that its better to take leverage at 10.5% (invest rest in bank at 9 - 10%) vs. just do a smaller deal cash down without leverage (partial payments during construction) will let you pay slowly. What metrics to use? How do i create an excel sheet modelling this? In what year IRR will be highest to enable sale.

Joseph M From a risk perspective, I think there is a short term possibility for the market to correct. But there is a long term secular growth trend due to demo, GDP reasons.

Thanks all for the warm welcome!
Ned - Check out my other thread for specifics on what I'm talking about related to Mumbai. I'm very new to RE in general so basically looking for guidance on metrics to analyze such growth deals.
Leo - I know the local market and I stick with public listed property development companies.
Joshua - Thanks for the welcome! I'll get a mug shot in as soon as I can. I am currently visiting Mumbai so gimme a few weeks until Im back to my Sports Illustrated quality pics in CA j/k :)

BTW, I havent zero-ed in on one single property but to alleviate risk, I can get in on a property with a publicly listed construction firm (of course, pay some premium therein).

Thank you, Ben for the concern. Perhaps past success on the speculation gives me confidence for another one.

Apart from the speculative nature of the investment, can you help me understand the math and key metrics to consider.

Basically, things like -
1. What would be best year to exit and why?
2. More importantly, should I service 10.5% debt while keeping reserves in a 9% CD ?
3. What would make the math work in my favor - maybe do another 100% equity deal (smaller deal) but i dont have to service high debt?

To add a perspective, I know it doesn't seem obvious in the US but the demographics are strongly in favor of growth for India (very young skew in population and huge demo growth - even china is aging and slowing in demo-terms compared with India.) This exaggerates in Mumbai which is an island city that can only go vertical.

Scott, others -

BTW, do not consider cashflows along the way after possession. The cashflow will cover the HOA and rest is miniscule to consider.

I wasnt use the right term - cash on cash. sorry! Basically, should I just evaluate the investment as (Money I put in vs Profit) over 5 years. Is this even reliable? How do I contrast the alternative investment - 9% in CD.

I replied to another thread we're on with more details on what I'm thinking. I'd love to share some perspective on actual on-the-ground figures for growth% in India. But I'm here to learn about stuff I dont know about and share my mistakes/learnings :)

Thanks for the reply. Note - I am CA based but currently in Mumbai on a vacation and the market here is crazzy. I'm looking at an investment in Mumbai (See latest report from an international RE firm for growth projections for pockets in mumbai - 140% over 5 years near planned airport etc).

http://www.knightfrank.co.in/content/upload/files/Resized_(2)_-_KF_Investment_Advisory_Report_2012.pdf

So, not a class project.

I was hoping to get in an under construction property with 80% LTV. I pay the mortgage ONLY on the amount disbursed. For an underconstruction property, this would be in stages over 3 years. Therefore, given my downpayment and staged construction, my effective cash outlay will be lower than a 10.5% atleast for first 2 years. I will be handed the completed property in 4-5 years.

I'm assuming 15%yoy growth would take me to 2x in 5 years. Since this is speculative, I could exit at that point. I could even hold for entire term - this is entirely flexible.

Now I don't know how to properly evaluate this investment and need your help (even for back of hand calculation).

BTW, I did another deal in 2006 in a second tier city and the appreciation has been 2.5x in 6 years. But the silliness was that I have 100% equity (no leverage or loan). I wanted to change that this time around but not sure how to evaluate it.

Before I end, the alternative to getting a leveraged property and paying 10.5X is to let the money sit in a CD at around 9% in India.

$$ is also strong at this point in time against Re. But long term trend is a more stronger (than today) Re compared with the $$.

I know its sounds like a class project for which I need some homework help ...

This is Jay. I'm a newbie to RE and found this forum when trying to evaluate a speculative investment. I like the community here - folks are so helpful even if questions (like ones I have) seem stupid for someone more experienced.

In the short term, I'm looking at investing in a high growth international market (which i understand since I grew up there) but there is no real cashflows to speak of. I found the forums lacking on evaluating growth investments alone (perhaps this is more about "investing" than speculation).

Please also let me know how to get my basics down on RE investing - references to books, CDs, online tutorials, whatever you think might help.