Quote:
Originally Posted by Cowboy89
I laugh at that advertisement he's got as the picture.
On the annual cash flow part: - completely ignores how much it will cost to find tenants and to maintain the condo (Over the 10 year holding period I imagine that alone would probably eat up the positive monthly CFs).
- Ignored is the concept that you would have to re-fi your mortgage in 5 years at rates most likely well north of the 3.5% rate used to come up with the mortgage calc which will most likely offset any increases in rent earned.
On the Capital Gain part: - Selling costs are completely ignored
- Overall return on equity is misleading because it's a 10-year return as opposed to an annual return. Once you realize that the CF is probably negative for 10 years, your illiquid investment is essentially depending on abnormal price appreciation to beat the returns on a well-diversified portfolio and even then might not compensate for the lack of liquidity
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Agreed with everything you said. I will also point out that $230k is almost certainly their smallest unit on the lowest floor. Their smallest floorplan is 449 sq ft. I can't see it renting for $1450 a month. I lived in a brand new downtown highrise on the 19th floor last year and I paid that much, but I also had an extra 200 sq ft.
Also I'm not sure how he considers paying off the mortgage principal as cash flow.