How to Get 20% a Year Out of Your Property

By Tom Dyson

"Of all of our travels, the Seven Sisters Inn is by far the best we have seen," says a guest.
The Seven Sisters Inn was built in 1888, using Victorian architecture...
Bonnie Morehardt and her husband Ken Oden restored the inn in 1986. They did such a fine job, the Florida Trust Historic Preservation Society judged the Seven Sisters the "Best Restoration Project" and listed it on the National Register of Historic Places.

The Seven Sisters Inn is in Ocala, Florida. It has eight guest rooms and an office. The rooms have different themes... There's an Argentina room, an Egypt room, and a China room, for example. Bonnie Morehardt and her husband were pilots. For 20 years, they traveled the world collecting Egyptian-themed art, custom armoires, and Oriental rugs to decorate each of their rooms.

"I hand-picked everything for each room," Morehardt said. The rooms rent for around $200 a night.

Today, the Seven Sisters Inn is famous across the country as one of the finest bed and breakfasts in America. Here's the thing: The owners weren't able to cover their mortgage costs... and this week, the bank will sell the Seven Sisters Inn in an online auction.

The auction started two weeks ago. It ends in two days. As I write, the current bid for the Seven Sisters is $117,500. You can also bid on the contents of the inn. For example, the current bid on an antique desk is $55. There's an oil painting going for $25.

You can follow the auction of the Seven Sisters Inn and its contents here.

Right now, as a result of the housing collapse and recession, banks are selling thousands of properties through auction all around the country. I noticed three new auction announcements for property in my town last week. And a local hotel held an estate auction yesterday.

These auctions are loaded with bargain properties. One of the properties up for auction where I live is only nine years old, in great condition, and in a very desirable location. I asked the owner of a property-management company about it... He told me it would generate $30,000 a year in rental income. The current bid for this property is $152,500. That's a 20% rental yield at current prices.

To earn a 20% yield from the Seven Sisters Inn, at $200 per room, you'd only have to host 118 guests a year.

If you're interested in property investment... or even if you're thinking about moving house, I suggest you check out your local property auctions. With a quick search online, you'll find thousands of property auctions taking place each month all around the country. You'll find some absolute bargains. Check your local newspaper. Or check these sites. They are the largest property auctioneers in America: www.marknetalliance.com, www.hudsonandmarshall.com, www.williamsauction.com, www.auction.com.

When homeowners default on Fannie Mae and Freddie Mac mortgages, the government assumes ownership of the house. The government does not want to be a landlord, so it sells these houses at big discounts to market prices. You can search Fannie Mae properties for sale by going to www.fanniemae.com and then clicking on "Homes for Sale." You can browse property for sale from Freddie Mac at www.homesteps.com.

The United States Department of Housing and Urban Development (HUD) also makes loans to homeowners. If these homeowners default on their loans, HUD assumes ownership and auctions them on its website. Prices average two-thirds of appraised value. You can browse HUD homes for sale at www.hud.gov/homes.

Finally, many federal agencies auction confiscated and surplus property. You can find residential, commercial, and raw land here. Check out propertydisposal.gsa.gov for the full listings in your state.

As the year progresses, my town will likely see more and more property auctions... Yours probably will, too. Property prices may stay low for awhile, but right now, there are incredible bargains to be had.

Good investing,

Tom.