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looking to invest in real estate with a partner

partner would live in\maintain the property for a year or so. Her income is low and she has no credit history, but my income and credit scores are high. We'd split payments and I'd cover the initial down payment. What's a reasonable expectation for return on investment when purchasing a small single family home to resell in 1-2 years?
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March 27 2013 - McClintock
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Answers (6)

It's dangerous to anticipate what the market conditions are going to be 1-2 years into the future. the safest investment is to start with the ARV (current after repair value) minus purchase costs, holding costs, repair costs, selling costs and the remainder is your profit. If the market goes up so does your profit, if the market declines you still have equity and can liquidate before you realize a loss. If you are concerned with % ROI, run the numbers to determine what your ROI is before you write the offer, and if you can make more by putting your money somewhere else, then pass on the deal.
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March 28 2013
Are you looking for appreciation in value? There are a lot a different trends in appreciation based on the part of town you would like to live in.
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March 28 2013
Depends - There isn't one definitive monetary number for this question. Even though prices are climbing your return could be as low as zero to a much higher number. We just had a client make a net of 22% before taxes and in this instance they found a home that needed major repairs and were able to do this and flip the property making a nice return. It sounds like you want to move in right away and this type of property is not a consideration.

The other considerations for an ROI in this time frame is price range, physical location of the property, example; Scottsdale or the city of Goodyear, type of property such as single family home features, and a good deal more goes into this algorithm to give you a number that relates to a return on your investment.

Any answer would be a crystal ball response unless we had more detais related to the question. You can see that the range is extensive and that it is based a lot on the above. Trying to answer your question as is, could leave you very disappointed. It's not somthing and REALTOR(R) would want to do to you.

Jeff Daley, PhD
Scottsdale, Arizona
Licensed REALTOR(R) State of Arizona
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March 28 2013
Since you plan on getting a loan, there is more to calculating an expected return on your investment than trying to predict future home values.

You'll want to analyze your finances to see what the loan is going to cost you.  I would recommend speaking to a lender so you can calculate in the cost of the loan over the years you expect to have the loan.

Your realtor should be able to recommend a good lender to you and then they would talk to you about what is available in the area you're looking. Then you'll be able to come up with a reasonable expectation of return on your investment. 
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March 28 2013
Market conditions are improving. I believe prices overall will be higher next year. You should still be doing your due diligence about the purchase - base price, location,  etc. and afterwards property management, maintenance, ability to make monthly payments.
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March 28 2013
You have the money, and the partner has bad credit?
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March 27 2013
 
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