Real Estate Watch #1 - a questionable listing

Address - 3505 Ingraham Drive

Asking Price - $649,900 July 2007

last on the market - $599,000 April 2005 (don't know sale price)

Year built - 1975

notable - major renovation and contains a rentable suite ($1300 monthly)

So what have we got here? Owners expect to receive $50k in profit over a brief ownership period of two years, that works out to about $2k every month or $68.50 every day since the new buyer moved in.  This doesn't even begin to account for the serious gain made by the previous owner (whether he was a long-time resident or reno-flipper is not known).  The date of the renovations preceded the listing by just enough that one might conclude the repairs were made to fluff a tired mid-70's building).  

Let us look a little deeper into the ownership fundamentals:

fuel - approaching $6k per winter

electricity - perhaps $1.5k each year

water - perhaps $1.2k (trucked water)

tax - $3.7k (this could easily be more)

25 yr mortgage with 25% down at 5.5% - $2,976

total monthly house cost including tax and utilities - approximately $4k

Well, if you can come up with a down payment of $168k and find a tenant to stay at $1300/month and have no unexpected repair costs then you are only on the hook for $2700 a month...  Seems a bit dependent on a lot of other factors, primarily a huge chunk of cash and a perfect tenant to pay the bills, not to mention paying $2700 each month on top of the truck, boat, food and other costs of living essential to YK.  

Lets put it this way.  If you had an option to rent this place like it was a duplex would you be willing to spend $2700 a month for the top floor?  I didn't think so.  The interest cost on this place is $2200/month based on the favourable mortgage terms mentioned above.  

You may only pay $500 down on the principal each month out of the total cost to run this place ($4k) but at least you can bank on the continuous profit of $68.50 you receive each and every day as the new owner!

The smart renter (one capable of buying this place) could invest his $168k at 4% easily and earn almost $7k each year.  That would easily cover three months rent just about anywhere in town and leave his capital intact, risk free and unencumbered.

(Rusty is making sarcastic noises in the background)