I wrote in last week's article regarding the continuing increase in the median sales price of homes across the US, as well as locally here in Diamond Bar and Chino Hills.
In retrospect, the investor who purchased a single family home in one of these two cities in 2012 appears to be a "Genius" investor! The value of the investment product has increased or appreciated at nominal value a whopping 46-49% in just 5 years. If that Buyer paid all cash for a median priced home of $441,000, his or her return on investment has rewarded the investor at an approximately 9% annual return, Cash on Cash! That property would now be worth $626,000. A similar investment in a savings account over the last 5 years would have averaged a return of less than 2% annually.
If the investor purchased that same median priced single family residence at $441,000 in 2012, and instead of paying Cash, decided to purchase with a 25% down payment of $110,250, the home would similarly be worth $626,000. It would have leveraged the Cash investment four-fold, giving the investor a Cash on Cash return of an incredible 168%-an average annual return of 33.6%! Wow…now that is the way to invest!
This article was written by Nef Cortez, a licensed Real Estate Broker, Ca BRE # 00560181 since 1976. He can be reached via e-mail at firstname.lastname@example.org.Please feel free to email any questions regarding real estate.