John-Paul's Blog

You can make money four different ways in real estate via appreciation, depreciation, cashflow and amortization. So for any one deal you need to check out every avenue of financial gain.

I found, through my favorite Realtor, Mom, a RV Park of 37 pads for $1.2 million that appears to be an outstanding investment.  Below is how I work out my four avenues of financial gain.

For the appreciation side of this deal: The real estate deal I am analyzing, is in an area of quickly increasing population growth, 95% in the last 4 years.  That is an excellent indicator that the property in that area will consistantly appreciate, making me more money when and if I put it back on the market.

For the cashflow side of this deal: The deal makes approximately 5-6K profit per month. But the upside is that it is only one-third complete and when it is done it will make $21,000 per month and will be worth $2.7 million. The capital needed to complete the park is 500K but the upside is well worth the investment.

Just an extra tidbit: You value commercial property via the cashflow income that it makes.  For example, a good general rule for valuing properties at a glance is as follows: Take that annual income, and add a zero on the end, and will get roughly what you should be paying.  So if a property makes about $132,000 per year on average, you might look at purchasing it for $1.32 million. Which this property was being listed at originally. That’s just a rough estimate due diligence and other factor methods value this property at around $1.2 million.

Depreciation works like this. For every piece of property you own the government allows you to depreciate the value of it over a 27.5 year span. So you can save on your taxes in this way and that would have money that otherwise would have flowed out of your pocket staying in.  So by buying this property, I will have saved money on my taxes.

And finally, you can save yourself money through amortization by educating yourself about the different types of mortgages that are available.  You can choose the mortgage payments and options that are right for you. Creststar commercial mortgage in Dallas is offering on this property 7.75% interest on a 30 year mortgage.

All in all, this property appears to promise an excellent return on investment! Anyone want to partner? Interested, contact me at JohnPaul@JohnPaulInternational.com!

This entry was posted on Thursday, September 6th, 2007 at 2:42 pm and is filed under Main Blog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.