Balanced Return properties blend both
attractive rental income today and good prospects for future capital gains.
They normally have lower ROI’s than cash flow properties but have a larger
probability of capital gain.
Balanced Return properties tend to be well located, in good school districts,
Single Family Residence’s (SFR) between 1200SF – 2400SF, 3 – 5 bedrooms and 2 –
3 bathrooms. A higher percentage will be financed than bought with cash. Many
have additional features such as spa, pool or patio area that add an emotional
element and help make a house a home.
Different property types within the balanced return category allow for an
individual weighting towards cash flow or capital gain focus. Over sixty
percent of the entire US property market is focused on SFR starter homes, for
families getting started, mature people downsizing, singles and couples. These
homes are typically 1200SF – 1600SF with 3 beds and 2 baths on their own block
of land. These are the most ‘in demand’ property type and the safest long term
bet for rental and resale.
Las Vegas home prices are primarily determined by a home’s square footage (SF).
If you buy a track home in a housing estate, (which is most) your home’s value
is largely determined by multiplying your home’s square footage by the price
per square foot in the area. If homes are selling at $80 per SF and you have a
1500SF home, your property is worth about $120,000. There is a plus or
minus 15% variation for condition and special features so your range would be
$102,000 - $132,000. It doesn’t matter if you spent $60,000 adding a
pool, spa, basketball court or tennis court, the home’s resale and appraisal
value for a loan, will max out about 15% above the average price of the area.
Currently these Balanced Return starter homes are worth around $110,000 and
rent for $1,100 per month generating a gross ROI of 12%. Take a look at the Balanced
Return (BR)starter home examples.
If you want good rental returns but wish to focus a little more on capital gain
then you need to buy a home with a larger square footage. But there is a
resistance point as we examine larger homes where the price per square foot
starts to become discounted and rental returns diminish compared to purchase
price. My perfect Las Vegas Balanced Return to Capital Gain orientated property
is a move up home in a good area near Red Rock, Green Valley Ranch or southern
Highlands. Ideally it is 2400SF, single storey when possible, 4 bedrooms, 3
baths, (one bed and bath MUST be downstairs if 2 storey), 2 master
bedrooms if possible, 3 car garage or RV parking, private back yard with pool,
spa, covered patio, facing north/south with as many upgrades as possible!
We’re not asking for much here .... so the goal is to get as many in that list
as possible. Currently these Balanced Return (BR) Move Up homes are worth
around $150,000 - $175,000, rent for about $1850 per month and have a gross ROI
of over 12%. ROI’s on these properties in 2006 were 4%! Take a look at the BR
Move Up home example.
You’ll notice from the examples that these returns are still fantastic. It
takes patience to get one of these great deals but should be easier coming into
winter 2011 as demand decreases. These homes are typically listed at $220,000
plus and I am negotiating the good ones down to these purchase prices.
Next we'll talk about our last type of investment: Capital Gain.
Author:Steve Bland Phone: 702-751-7071 Dated: September 10th 2013 Views: 5,462 About Steve: ...
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The Steve Bland Group (SBG) is an international, investment focused, Real Estate Company. Our focus is on loyalty, generosity and professional excellence to each other and our clients. Understanding the local market with respect to the global economy is paramount to our clients. We encourage an international culture and creative approach to traditional real estate.
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