I was at a party a couple of weeks ago and had a quick but in-depth conversation with a friend who manages properties across the Valley. He explained to me that many investment banks are looking at investing in large tracks of real estate to buy and rent. He explained that many investment banks are seeing new opportunities in becoming a landlord. They classify land investments as the New Asset Class.
I am here to say I agree. Just think about this: you purchase an investment property at $150,000, and you put down your 25% down payment, which puts your loan at $112,500. You lock in a rate at 4.75%. That is cheap investment money. Your P&I is $586.00, and tax and insurance add up to another $150.00. Total payments are $736.00; you rent the house out for $1100. If you take your initial investment of $37,500 divided by your monthly cash-flow of 364, you will get a net profit of just shy of 10%. This is before any tax breaks. (Consult your CPA.) Ten percent is a great return on an investment. Now you can see why investment banks are considering this a new asset class.