However, now I am so thrilled to be able to articulate WHY.  I took a class (a couple, actually), in investing – how it works, what numbers to crunch, etc.

Let’s do a scenario that shows how you can experience a 15% return on investment, aka ROI, when investing in Tri-Cities real estate.

The property is purchased for $130,000, with 20% down.  On a 30-year fixed rate mortgage with an interest rate of 5%, the monthly mortgage payment is $558.29.  Add taxes and insurance and HOA  fees, the owner pays out an additional $180.00 per month.

The property rents out for $1200/mo.  This is actually a real possibility, since our rental market is so tight, and our subject property is in south Richland, located literally minutes away from stores, houses of worship, freeway interchanges, and school with high test scores.

One thing we need to figure out for our equation, is the vacancy rate.  In our market, vacancy is highly unlikely, but we’ll pretend one month of the year no one will be in the property.  So, income ($14,400 – twelve months of rent) minus vacancy ($1200 that one month no one is there)  minus expenses ($180.00 x 12, those monthly expenses for a full year) equals Net Operating Income (NOI).

Expressed another way…

$14,400 (Income)

- $1,200 (Vacancy)

-$2160 (Expenses)

____________

$11,040 (NOI)

Now, NOI minus Annual Debt Service, which is the monthly payment multiplied by twelve, ($6700 in this case) equals $4,340, which is the Pre-Tax Cash Flow.

OR -

$11.040 (NOI)

-$6700 (Annual Debt Service 558.33 x 12)

____________

$4,340  (Pre-Tax Cash Flow)

Finally, to get the ROI, we divide the Pre-Tax Cash Flow by the Down Payment pus Other Costs of Acquisition (($26,000 down payment, $3,000 in closing costs =$29,000) and we get 15%

4,340 ÷ 29,000 = .15…15%

A 15% return on investment is FANTASTIC!  With savings accounts, stocks, bonds, etc.  you are lucky to get a single digit rate of return.  So 15% is enormously profitable!

Any questions about investing in real estate??  Give me a call.  I love using my financial calculator now!

(Stock image via Shutterstock. Used with permission.)

The Walk Score is supposed to indicate the desirability of a city or a neighborhood.  The higher a walk score, the less likely a person is to use his or her car to run errands, which helps the environment.  More walking equals a trimmer you (they claim that people who live in more walkable neighborhoods weigh seven pounds less than those who live amidst suburban sprawl). In addition, if you’re out walking around your community, the more apt you are to be involved IN that community, making it a place where you have a vested interest in keeping it clean and wholesome.

The scores in each of the major cities of the Tri-Cities, are pretty poor, I’m sorry to report; with 100 being the top score …Kennewick – 45, Richland – 43, and Pasco – 45.  Richland is the only one which really surprises me because the city was originally designed to BE eminently walkable.  When the U.S. government took over ownership of the city and designed the streets and built the homes and created the commercial areas, the city was laid out so any person without a car could easily run their daily errands.  However, the city has long outgrown its original “downtown” area and now stretches throughout almost thirty-eight square miles!

Kennewick and Pasco both began as small towns, begun as most American small towns are – with a railroad serving as the city’s commercial center, and shops and residences lining a nearby main street (and a 1st, and a 2nd, etc.).  If both of those cities had spiraled out from that center location and continued on a grid pattern with shops and houses scattered throughout, they’d both have higher Walk Scores.  But Kennewick now covers 24.3 square miles, and Pasco covers 30.2 square miles.  It’s pretty difficult to keep up a grid pattern over that amount of space, over years of construction and trends in demographics.

All the cities have neighborhoods within each city, which will boast a higher or lower score.  My personal residence rates a 17 (is THAT why I’m still overweight??), but the office here in Kennewick is rated as “Somewhat Walkable” at 68.  You can type in the address you’re curious about and get a very specific rating.

This map is fascinating. You click on a county and you find where the people moved to when they left, or where the people moved from when they came to live there. For example, 462 people left King County, WA to move to Benton County, but 392 people moved from here to there. We netted a gain of 70 people from the west side. Woo-hoo! Maybe one of them won’t be able to live without a Krispy Kreme and will open one up here…

So, locally, we made the list at #1058 (Kamiakin High School in Kennewick) and #1094 (Hanford High School in Richland). Kennewick and Southridge (in Kennewick) , Pasco and Chiawana (in Pasco) and Richland High did not make the list. Chiawana may be too new, as it’s first school year has just ended.

I was disturbed to see that my old high school in California ranks 14 schools below our rival high school. Ridiculous, I say. Everyone knows that Glen A. Wilson High School not only turned out the smartest grads, but also the best looking . Los Altos was for losers.

Check out where your school sits on the list.

We’ll be holding open over 250 houses, which is more than half our inventory. Our closest competitive agency doesn’t even have that many houses listed to hold open.

This week, as sort of a teaser event, tonight, Wednesday and Thursday, we’ll be holding open a portion of our houses in each city – Pasco tonight, Richland tomorrow and Thursday is Kennewick‘s day in the spotlight.

If you’re in Pasco on Sunday, drop by and see 6210 Landsdowne Ct. If you can’t make it, drop by on the web -

http://6210landsdowne.com/

Think this is a great idea, but you’re not in the market for a new home yet? Fear not, there’s another one scheduled for the fall!

Very cool (pun intended).