Hello everybody, need some help here.

[J.H.]

Ok, so im new around here. First of all, im sorry about my english, it isnt my first language. I need some help from you guys about real estate.

I study economy for a few years in university and after that i started working for a year. But i realized that economy is soooooo boring. So i applied to another country in Europe for medicine. So here I am, in a "poor" european country, studying medicine.

This city where I live in is a pure goldmine. By that I mean, there are endless of opportunities. You can make money on anything here.
Anyway, im thinking about building RENTAL-FLATS!

Why? This city has about 200 thousand people living in it and from thoose 200 thousand there are 35 thousand STUDENTS! And this city is growing fast and economy is getting better and better for each day.

I saw a diagram for the prices on the flats, 10 years ago until now and its a very lovely diagram for real estate owners. Now, the prices on real estate here is still low.

You can buy a BRAND NEW 65 squaremeter flat with balcony for 55 thousand dollar. Then imagen, the company selling this flat is making profit from it.

So, why I made this post is, I want to build rentalflats, but I need to ask a couple of questions.


I have the money to build for example 4 flats by myself with some loan. I remember before that you could borrow 90% and put a 10% downpayment, i think that works today too. So lets say i build 4 flats for the cost of 60 thousand dollar each that means 60x4=240 thousand dollar totalt, a downpayment with 30 thousand dollar. Most likely the value for the flats are higher then 60 thousand dollar when its ready. Maybe the value is 75 thousand dollar per unit. a 15 thousand dollar profit per unit. Is it possible to make a "higher" loan on theese 4 units? So i can get some money back to re-invest in 4 new flats? Cause I want to keep build all the time ( ofcourse if i find the right locations for them etc etc).
I have studied a lot of math in my life. Is there any "formula" for rental flats? For example, all the different costs for a flat, loan, intrest on the loan, maintainment, etc etc versus the income from it.
There has to be some kind of formula for it.

[Codythebest]

I studied mathematics myself and never used my degree diploma except for this:
-Find a piece of land where it is ideal to built.
-Ask the owner to cooperate in the process
-Make a corporation where he put the land in and you put the construction.
-Go to the bank and ask construction loan with land as colateral.
-Put half of the units under contract BEFORE to build.
-Build and sell the units.
-Pay the land owner for his land.
-Pay off the bank
-Keep the remaining profit and start over again.

I did that few years back in Spain and you don't have to have any money.
Here in America, they don't know and still no comfortable to do that. I just tried again with a land where there is a permit for building condos. Usually, 1/4 of the units to pay the land owner, 1/2 to pay the bank, 1/4 for myself. Banks get the idea but owners stil not. And most of the time 1/4 of the unit is more than the land asking price...

Good luck...It's really fun, try it....

[J.H.]

I studied mathematics myself and never used my degree diploma except for this:
-Find a piece of land where it is ideal to built.
-Ask the owner to cooperate in the process
-Make a corporation where he put the land in and you put the construction.
-Go to the bank and ask construction loan with land as colateral.
-Put half of the units under contract BEFORE to build.
-Build and sell the units.
-Pay the land owner for his land.
-Pay off the bank
-Keep the remaining profit and start over again.

I did that few years back in Spain and you don't have to have any money.
Here in America, they don't know and still no comfortable to do that. I just tried again with a land where there is a permit for building condos. Usually, 1/4 of the units to pay the land owner, 1/2 to pay the bank, 1/4 for myself. Banks get the idea but owners stil not. And most of the time 1/4 of the unit is more than the land asking price...

Good luck...It's really fun, try it....

Thank you for your answer.
But I would prefer to keep the units for myself. Why? In 10 years the units are worth doubleup. I rather keep them and not making any profit for a couple of years and then sell them for higher price.

[Codythebest]

You do whatever you want to do with them. At that point, they'll be yours, so selling, keeping, giving them up to charity...who cares?
Bottom line, you get them with no money from your own pocket...

[jimkimmons]

I think you'll find what you need here (http://realestate.about.com/od/knowthemath/tp/financial_calcu.htm). All the different investment math problems are explained and you get spreadsheets for download.

[netrambler]

It is always riskier to speculate the future value than to build value. Alot of people saw phenomenal appreciation here where I live over the previous 10 years so they took all the equity out of their property to buy more. Now the prices are dropping and they can't sell without bringing money to the table. If you can only break even on rental income, then you are basically gambling on appreciation. I prefer a safer investment model buying with an equity cushion to protect your interests in case of market fluctuations and positive cash flow if I am planning to hold on to a property.

The other model I like is forced appreciation. This is possible by taking under-performing multi-unit rental properties (too many vacancies or too low rents) and bringing the performance up to par. Since these types of properties are valued by the income they bring in, this can greatly increase the price you can sell the property for.