When Nevada County's housing crisis began in 2006 home ownership was at an all time high. But when the bubble burst many family were forced or chose to move out of their over valued homes. This event created an opportunity for investors. The buy and hold type investor purchased the fire sale priced property from a bank and then rented it to a family, who very well could have given their home back to the bank. The effect of all the displacements is a tighter rental market as well as higher rents.
In Alta Sierra, I recently saw a, three bedroom three bath home (2,537 sq. ft.) on a very busy section of Alta Sierra Dr. renting for $1,500. The very same house sold for $144,000 in 2011. At that time a 4% loan was obtainable. When adding mortgage cost and property tax the total is $814 per month.
Revenue example$1,500 rental income
-$814 mortgage 4% and prop. tax
$686 net to owner or savings if renter had purchased.
The numbers used in the example, assumed the purchaser did not put down any money as a down payment, did not make repairs to the property as well as maintenance and insurance were not factored. The annual net revenue to the investor is $8,232. The savings could have been the renter's savings if they purchased the very same home. Not to mention the IRS tax benefits of owning a home.
Interest rates are a bit lower than a year ago while prices are a little higher to flat over the same period. The bottom line is, if your credit is good and you can afford it. Now is a great time to buy regardless of where prices are headed.
ReplacementAnother factor is replacement cost. If you were to build the same home today (2,537 at $100 per sq. ft.) it would cost $253,700 to build. You will also need to buy the land, for argument sake let us use a value of $46,300 to purchase the land. Total replacement cost if you can build for $100 per foot is $300,000.
$300,000 replacement cost
-$144,000 purchase price
$156,000 replacement equity
While the market has become more active than at the time of the example above, there are still many really good investments in Nevada County. I would be honored to assist you in locating an investment and/or home for your family. (530) 477-2277
This article (click here) got me thinking, so please also read it is national story.