Bluffton, SC · Member since 2018 · 63 posts · 205 votes
Well, I am pleased to say that I finally got my first property in Columbus GA renovated and rented. I purchased the property on auction dot com for $25700. Renovations costed $12,000.
I am all in for $37,700.
On December 31st I signed a 12-month lease with my new tenants for $1050 a month. Can you say super excited! Now I am trying to decide whether I should refinance and take the cash out or just keep it going and save up the cash to repeat the process in another year or so. I purchased and renovated using my savings so I don't have a mortgage on the property.
@Karam A Tascoe, I am in a similar situation in Rockford Illinois. We have paid for 3 houses this year in cash all in the 25-40k range and closing on #4 next month. They rent from 900-1200 per month. In 2019 we are going to burrr them all and get busy
Our taxes and insurance on these properties are about 200 per month.
So that means we have decent cash flow.
We also have a decent income and credit.
--> Now for us (like you) I think it comes down to your "why" or your goals. What is your reason for doing this rental thing? - Do you want cash flow now - Do you want cash flow in 20-30 years when paid off? --- For sure both but it makes a difference.
I want more now, not more from one prop Say you buy one house per year as you save up. Depending on your goals and your age and if you want to work your job, that makes a difference. You will cash flow $650 per month or 7800 per year.
If you pull 40k out of that house using BURRRR, you can likely put that as a down payment for 3 more houses in the turn keyish 40-50k range.
A 40k mortgage is only $200 per month.
So if you add that $200 per month to house #1 you are still cash flowing $450 per month
But now you can mortgage and buy 3 more properties (saying they are similar numbers) adding cash flow of: $450 per month for #2 $450 per month for #3 $450 per month for #4
All the while still saving your money and buying cash for another house in a year or what ever since to get #2, #3, and #4 you didnt have to use any of your own money.
So now your total monthly cash flow is $1800 per month vs the original $650 just by pulling the equity out of #1.
Not only that but you are winning in the long term game too because you will have more prop paid off sooner.
So then if you repeat that same process next year You would have 8 cash flowing $3600 per month.
OR
You could just burrr one at a time but do it every 6 months ( I think that's how long you have to be on title) and not come out of pocket ever again. But for me, with your income and cash flow, I think speed of growth and Income will be key to independence.
Congratulations. I have purchased 2 properties from auction.com in the past. I'm a buy and hold investor. Personally, I think you should not refinance and hold on you 100% of your cashflow. You will have vacancies from time to time and your your cashflow will diminished. Refinancing and taxes and insurance fees will eat into your profits. I am small time investor and like to stay conservative. I was advised to buy one property at time and learn to deal with the property management aspect. Buying a property is easy, but holding, maintaining and management is the hard part. Take it slowly and you'll have less headaches down the road. I have a total of 5 rental properties, free and clear and I'm looking into acquiring more. Congrats, again on your first investment.
That’s awesome Karam. Great numbers. I can understand the feeling of not wanting a mortgage. You will definitely grow faster using debt (especially since you’ll be leveraging an asset you fully own) and could potentially find two deals with the refi money and possibly a little more savings. Then you will have three properties but only one mortgage. Just my two cents. But I’m a newbie too.
Congrats on the great start! Also, there's a a lot of great info/advice provided here. I like the HELOC idea for your situation as you only have to pay interest on money you are using.
wow thats crazy low prices.. even a downpayment wouldnt cut it in Bergen/Hudson county in NJ for that, and thats considered super cheap for NYC area. Although i do get 1 room rented in a condo or multifam for 1000/m but still. The returns are not bad.
wow thats crazy low prices.. even a downpayment wouldnt cut it in Bergen/Hudson county in NJ for that, and thats considered super cheap for NYC area. Although i do get 1 room rented in a condo or multifam for 1000/m but still. The returns are not bad.
That’s awesome Karam. Great numbers. I can understand the feeling of not wanting a mortgage. You will definitely grow faster using debt (especially since you’ll be leveraging an asset you fully own) and could potentially find two deals with the refi money and possibly a little more savings. Then you will have three properties but only one mortgage. Just my two cents. But I’m a newbie too.
Thanks for the advice Brandon. The HELOC is certainly something to consider
Congratulations. I have purchased 2 properties from auction.com in the past. I'm a buy and hold investor. Personally, I think you should not refinance and hold on you 100% of your cashflow. You will have vacancies from time to time and your your cashflow will diminished. Refinancing and taxes and insurance fees will eat into your profits. I am small time investor and like to stay conservative. I was advised to buy one property at time and learn to deal with the property management aspect. Buying a property is easy, but holding, maintaining and management is the hard part. Take it slowly and you'll have less headaches down the road. I have a total of 5 rental properties, free and clear and I'm looking into acquiring more. Congrats, again on your first investment.
@Karam A Tascoe, I am in a similar situation in Rockford Illinois. We have paid for 3 houses this year in cash all in the 25-40k range and closing on #4 next month. They rent from 900-1200 per month. In 2019 we are going to burrr them all and get busy
Our taxes and insurance on these properties are about 200 per month.
So that means we have decent cash flow.
We also have a decent income and credit.
--> Now for us (like you) I think it comes down to your "why" or your goals. What is your reason for doing this rental thing? - Do you want cash flow now - Do you want cash flow in 20-30 years when paid off? --- For sure both but it makes a difference.
I want more now, not more from one prop Say you buy one house per year as you save up. Depending on your goals and your age and if you want to work your job, that makes a difference. You will cash flow $650 per month or 7800 per year.
If you pull 40k out of that house using BURRRR, you can likely put that as a down payment for 3 more houses in the turn keyish 40-50k range.
A 40k mortgage is only $200 per month.
So if you add that $200 per month to house #1 you are still cash flowing $450 per month
But now you can mortgage and buy 3 more properties (saying they are similar numbers) adding cash flow of: $450 per month for #2 $450 per month for #3 $450 per month for #4
All the while still saving your money and buying cash for another house in a year or what ever since to get #2, #3, and #4 you didnt have to use any of your own money.
So now your total monthly cash flow is $1800 per month vs the original $650 just by pulling the equity out of #1.
Not only that but you are winning in the long term game too because you will have more prop paid off sooner.
So then if you repeat that same process next year You would have 8 cash flowing $3600 per month.
OR
You could just burrr one at a time but do it every 6 months ( I think that's how long you have to be on title) and not come out of pocket ever again. But for me, with your income and cash flow, I think speed of growth and Income will be key to independence.
You make a good argument Mike for using the BRRRR method. How much are closing and financing going to be on one of your properties when you refinance? How do you factor in paying for the mortgage in the case of vacancy?
Congrats on your first house !! What sort of tenants are you Currently attracting ? Are they blue collar or white collar folks?
Im not as picky or stringent as some landlords. Because I don't use a property management company I interview all of my tenants personally. I explain my requirements upfront and dont mince words. You tear it up, your out, you miss rent, your out. My requirements are pretty simple. Stable income and be able to afford the rent. I interviewed felons, single moms and retirees. Not many white collar folks as they tend to want to be in higher-end areas. i selected my current tenants based on the fact that they were married and both disabled vets meaning that they get guaranteed checks every month and had their deposit and first-month rent ready to go. I push the limit of rent because I do a good job with the renovations and it weeds out people who really cant afford the place.
My husband and I also bought a small SFH from auction.com this past summer and will have a lease starting Feb 1st. We already have a triplex and in partnership on a 4plex so opted to deleverage our portfolio by keeping our cash invested in it. Instead, we are utilizing a line of credit on the property, allowing us to purchase future flips/BRRRRs. If we were at the bottom of the market, I probably would of just done a cash refi, but being the peak of the market, I'm liking having some reserves for whatever the future will throw our way.