Real Estate

I have noted that my philosophy about real estate is very peculiar. While I am eager to invest more and more, I only take a step ahead when I see that the deal complies with all my rules. Here are they:

• I only buy undervalue, and in particular 20%+ undervalue. The funny thing is that money is there to be made even on fair deals. Well, tomorrow may be a different day. If you buy undervalue, you’re protecting your butt. If the market comes down by a 20% factor, you are still fine. OK, this sounds trivial so far, so let us analyze the complicated questions: if the only great deals I find are in less prosperous areas, do I still buy? Depends on what is less prosperous, but yes, I am willing to take up way more risk. The only thing I really care about is having tenants I can serve (see point 2). Rule #1: I know my market inside out.  

After 2 years studying Real Estate (RE), I came up with 7 reasons that make it a great investment. It is not that I think that RE is the best investment ever, but RE has certainly advantages over other types of investment. Let me break point out 7 great advantages of RE and break them down for you guys:

My property manager just gave a call to inform me that he found new tenants for my rental property #1, which is great news! The condo was leased out to the tenants on a one year for €275 a month (I will sign the contract next week). From that, I have to pay the condominium fee, property and renting taxes, and management fee, so this will be about €170/month cash flow positive. Since I have renovated the place recently, I will have some tax advantages in 2016, so I expect the net cash flow to be about €200/month.

Two weeks ago, I also started to look for a second property, which I expect to buy until August. I will most likely buy this property in a different city (but also in Portugal). I expect to spend up to €40K, using leverage, and rent it out for €350 (about €3000 net per year). As I said in other posts, I stick to one rule when it comes to the math of a RP: every condo I buy should generate cash flow to be paid in 15 years if no mortgage is used (these figures exclude fixing costs but account for taxes and property management fees).

In August, I will assess the performance of RP#1, and the performance of my property manager, as I have to decide if I want to extend the contact I have with him. Up until now, I think his fee is totally worth it.