Tuesday, April 25, 2006

Good vs. Bad Part 2

It smells so good. It looks so nice. I love the pretty flowers in front. The spacious kitchen is outstanding. If I love it, my new tenants will also love it. It must be a good investment.

Pleeeease! Use your head, not your nose. Just because the home you just walked out of smelled like fresh baked cookies, it probably stunk as an investment. Not that all good looking homes are a bad investment, but the cash flow on these are usually ones that are not worth doing.

Recently, I had a client that wanted to purchase a brand new duplex with 2 bedrooms 2 baths and a 2 car garage on each side for $209,900. Depending on what area of the country you live in, this could sound like a bargain or an over-priced elephant. But when you consider that these duplex’s rent for $625 per month on each side, one can quickly see that once you include taxes, insurance, and maintaince, it will take a long time before this animal will pay off; if ever. After careful consideration, the buyer decided that it would be better to look elsewhere. Good choice.

Keep looking. Don’t base a home’s good qualities based on if you would live there or not. If you love the wallpaper that does not mean that it will mean anything to your new tenants. Typically, most tenants want a clean home to live in, but color of wallpaper is normally not that important.

Cash flow. It is all about cash flow. If the home does not work financially but it smells good, run, run fast.

Paul Dizmang

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