Quote:
Originally posted by Wayne at Pelican Parts
Nope, not the smart one. The CAP rates for California here are so bad that you could easily sell the property, put the money in Treasuries, and make the same amount or more per year with zero risk.
The place I'm renting sold for $880K to the current owner in September. I'm paying $2950 in rent each month. Prop taxes are 1.1% or $800/mo. If this person paid cash for the house, then their ROI on this investment is a scant 3%. Even if they didn't pay cash and financed it, with the cost of money at well above 5%, there is no room to make any money. Considering that prices seem to be flat or declining, it's silly to own property in California at this particular time.
-Wayne
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I think that you are assuming that they put a lot of their own money into the rental house.
Person A has $XX extra each month on top of their primary residence. You are saying that they could put it into investments like your Treasuries ect, OR they could purchase a rental property. I think that they do both. Unless they are renting it for a loss, then the renter is paying to purchase the house for the owner. Especially if they used a 0down loan. Is it VERY risky? Sure. But unless the owner is subsidizing the renter, they can use their own money to invest elsewhere and have someone else front the money for the RE "investment".
I don't know much about CA but that is what the people around here are doing. Me? Nope, I am too risk adverse. But for my primary residence, I would rather Potentially put money in my pocket than a Guarantee to be putting money in someone else's. (regardless of if they make a profit with it)