Example of Smart Investing

Ok folks. For those of you who need a visual presentation of what smart investing is, I have laid out the fundamentals so you can see what a proper investment is supposed to look like.

Our case study today is 2729 Quincy Ave. in Ogden. Its a cute brick bungalow with 4 bedrooms and in average condition. Here is the spec sheet from the MLS.


This was a bank owned (or REO) property. As you can tell from the remarks, the bank wanted a significant earnest money deposit in order to consider any offer placed on the property. The property was originally listed at $106,900 on 11-15-07. There were no takers. The bank dropped the price to $94,900 on 12-14-07. Still no takers. On 1-11-08 the bank dropped the price again to $89,900. One contract was accepted 2-1-08 and withdrawn on 2-11-08. Then another offer was accepted 2-22-08 and again withdrawn on 2-27-08. There must have been some condition issues that needed to be addressed at this point because the bank finally reduced the price to $83,900 on 2-29-08. Along comes our winning cash bidder on 3-14-08. The buyer pays $78K and takes the property.

So, was this property a good deal? Lets assume the usual bank owned property condition: Odor issues, some plumbing and electrical work, and need of new paint and carpet. Lets estimate repairs of $12K. The home sold for $78K so the buyer will be into the place $90K after repairs. Did this buyer get in over his head? Lets take a look. Below are solid comparable sales.



Just by looking at the sales prices, it seems this buyer is off to a good start. In fact, he will still have about $25K equity AFTER repairs. But lets take a closer look at the $/SQFT comparison. This will equalize the minor differences in size, floorplan, ect.


When we look at this chart, this investor did very well. He picked up this property for $42/sqft versus the retail sales prices in the $65/sqft range. That is smart investing. This investor made money when he bought the home. The best part is that 4 bedroom homes rent for about $850 in downtown Ogden. With a $90K mortgage his payment will be around $700. Thats a $150 profit each month on top of the huge equity position he has gained. Very smart.

In a future post I will feature dumb investing. Stay tuned...