Ok I have read enough and its time for me to step in!
I have invested in the past 4 years in low income properties. With my background and experience it is possible to clear a return of 10-15% on your money it depends on how much risk you're willing to accept for the higher end of the return. Some examples, I have mutiple house in the portfolio, all of them are in areas of lower-income demographics. Some areas are terrible some are decent that I would live in if I had no choice (non-frum israeli). Here is an example of one:
Purchase price $65,000
Initial reno - $10,000 - paint inside, outside, materials, and make a 2nd bathroom
Misc expenses - $3,000 - 1 month rental comm, and 1 month period to hold off the market to find a tenant and renovate.
Total 1 year expense: $78,000 - using this number as control for calculating the ROI (return on investment)
Yearly Expense:
Taxes: $1300 a year
Management: $1800 a year - 10% of the rent roll
Misc. Repairs: $1000 - On the higher side, usually no more then $500 a year on average.
Total expenses: $4100
Rent Breakdown:
Yearly rent: $18,000 - $1500p/month
So you take $18000 - $4100 (total expenses) = $13900
$13,900 / $78,000 = .178 or 17.8% return on your investment
The only thing that is missing in this calculation is insurance that is not factored in to this particular scenario. If you want to minimize your risk further you can take out a policy which will be approximately $2000 a year that fully insures the house. In turn it will yield your to the following calculations:
So you take $18000 - $4100 (total expenses) - $2000 (insurance) = $11900
$11,900 / $78,000 = .1525 or 15.25% return on your investment
But wait there is more to this then the simple math I am showing you. The above house is an actual property I own and its not made up numbers. If you take in consideration that every year you have similar expenses on the move-in/out of a tenant then your ROI remains the same. If your tenant stays for an extra year your ROI goes up, and if you tenant stays B"H for 3+ years your milking the ROI to over 20% return!
The biggest problem I have experienced is locating the right management company. No one will replace your love and care ever, so thats not what you should be looking for in a managment. You should look for someone who is reliable, honest, and good at what he/she does. in my case it took 2 different management companies in the past 4 years to figure out one I was happy with.
The other hurdle is finding the deals, which seems to be quite hard at the moment in the market that I am invested in. However there are a ton of places around the country that have hard hit areas that are going to produce high yields, finding them is the daunting task and setting up an operation to buy rent and renovate is difficult too.
I read this:
http://matzav.com/israeli-real-estate-scam-targeting-frum-people and got pissed and decided to make this post and left the follwoing comment:
28. Comment from Israeli Investor
Time June 14, 2013 at 10:18 AM
You are simpley out of your mind! Stop scaring people off from building something for the future. Your 30 year experiance and my 5 years experiance in low income rental market is like night and day. I can evict with a total out of pocket expense of less then $1000, it would take 27 days to evict. My rents are much much higher on averagge 1500 a month for a 75-100K invesment. I have insurance if they burn down the house, and I am very happily getting a return of 12-16% on my investment after all expenses. So quite frankly please stop making it so bad, furthermore I agree investing from a foreign country probably a bad idea not because of the expenses, but its hard to manage from afar, Period the end.
There is money to be made, but its not going to be easy if you live so far away.
Your article should have instead of scaring people from investing enlightened them on how to find out if the house they are investing in is actually of value. Not the $1000 house being sold for $50k.
