Housing woes

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Housing continues to fall. Here's the latest property transaction in my building. BlockShopper

Running the numbers, this unit traded at 39 cents on the dollar from the peak transaction. My condo is, unfortunately, a very close analogy to this unit.

I'm assuming the transaction was a cash transaction as banks have been reticent to underwrite new loans in our building due to the Fannie Mae/Freddie Mac 80% Owner Occupancy rule. I happen to know that rent on that unit is probably $900/mo, and the assessment for the unit comes in around $350/mo. Taxes are probably $900/year but should be lower given the recent sales price.

So, if you assumed that you could rent the unit 75% of the time, you'd be looking at $8,100 of rental income, offset by $5,100 of ongoing expenses - or a $3,000 pre-tax profit on a $65,000 investment (4.6%). Continuous rental (12 months instead of 9 months/year) would increase your pre-tax profit to $5,700/year or 8.77%. This is in the first year, before the effect of principal appreciation or rent increases is taken into account. Wow!