I have spent a bit of time playing the FaceBook game Mob Wars: La Casa Nostra recently (Wanna join my mob? Add me!), and noticed that its purchasing model is actually quite sophisticated – and in order to make the maximum amount of money from your property portfolio, you are going to have to be a little bit careful.
If you haven’t played the game, basically you are a mobster, who tries to fight him (or her-)self up in the world. You get in fights, you do jobs, and you fight bosses. Part of all of this is that you use the money you earn to buy property, which then, in turn, makes you more money.
Take an apartment in New York for example. The first time you buy one, it will cost $200,000, and will earn you $5,000 per month. That means that for every dollar you spent on the apartment, you earn 0.025 dollars per month. That’s $0.30 per year, and $3 per 10 years.
Now, if you buy an apartment, the price for the second apartment jumps to $220,000. A third one costs $240,000. A fourth will set you back $260,000. Keep buying single apartments until you have bought 10, and the 11th will cost you $400,000. So, your Nth flat will cost X+(X/10*N), where X is the base price of the first flat you buy.
Buy in bulk!
When you buy 10 single flats in Mob Wars: La Casa Nostra, you end up paying 200,000 for the first, $220,000 for the second, etc. The first 10 flats will set you back $2,900,000.
However, you have the option of buying 5 or 10 apartments in one fell swoop. Now, if you buy 10 apartments, the 11th apartment will still cost 400,000, however, you didn’t pay the premium of all the intermediate steps.
So, the first lesson: Always buy in bulk. If you buy 10 single flats, you pay $2,900,000. If you buy 10 single flats in one go, you pay $2,000,000. That’s almost a third less – so you’re making some huge savings.
The fact that the prices rise rapidly on the properties you buy means that the market changes as you are buying them.
Since you only make $5,000 per month from an apartment, it’s easy to overlook them. But remember, apartments are very cheap to buy, so you get a lot of bang for your buck.
This means that if you have never bought any property at all, the cheap properties in New York give you the most bang for the buck.
In fact, you know the residential highrise in Chicago? That only starts making sense after you’ve bought 140 villas in London.
I’ve created an Excel document that you can use to plug in all your properties. You can download the document here.
The 2 rules for careful investment
1) Always buy property that has the highest possible income per $ per 100 years (use the Excel document to determine this)
2) Always buy 10 properties at the time.