All Forum Posts by: Ari Friedman

I walk through some calculations and link to a calculator to do them yourself in my post here (scroll down):

https://www.biggerpockets.com/...

Interesting to see this new index correlate with the impressions of y’all observing the market directly.

Just ran across this:
https://haus.com/resources/the...

The inventory comparison is interesting, but most interesting is their index reportedly only has a 2 week lag. That means the recent wild ride in interest rates hasn’t really hurt prices. I wonder if the higher end is cooling off, but because their index is based off a pretty modest home, it’s not reflecting that. Presumably some of those in the market for a 450k home are now looking at 350k homes.

I heard him recommend this on the podcast and my eyebrows went way up. A HELOC or second loan is superior in every way: Lower effective interest rate, and greater LTV% (usually up to 80% on investment properties, more on primary).

What do I mean by “effective” rate? Well, to get the extra equity out in a cash-out refi, you have to pay higher interest on all of the balance, not just the additional equity you pulled out. The right way to view those extra interest payments is as increasing the interest rate on the equity you pulled out, since that’s the change compared to the status quo.

Your effective rate is likely much higher than you think. Here’s a reasonable example (eg I used realistic assumptions and didn’t try to juice the numbers to prove a point) showing that to pull $25k equity out of every 100k appraised value when you owe 50k of that already, the comparison isn’t 3% vs 5.5%, it’s 3% vs >10%. Historical return of real estate is definitely not 10%. Not worth it. Get a HELOC or second mortgage.

calculator is here: https://www.mtgprofessor.com//...

Edit: A simple way to understand what’s going on is you’re paying the rate difference (5.5-3=2.5%) on three times the balance—75k not just 25k.

Would definitely get permits done. L&I has been slow lately though. Check with a contractor what a realistic timeline is.

If you’re doing structural work especially  you do not want to cut corners. 

The toilet leaked, and replacing it stopped the leak. You blamed the tenant. Now the refrigerator leaks, and your repair person can’t find the leak. You’re blaming the tenant again.

There are dozens of places where water is generated in a refrigerator. For instance, in a top-freezer auto defrost model, every defrost cycle generates water which drains out a channel. That channel often blocks with ice, meaning a few cupfuls of water rain down into the fridge below.

You need better repair persons, and to stop blaming your tenant for things outside their control.

If your general inspection indicates sufficient problems with the roof, plumbing, electrical, and structure that your lender is asking for these things, just walk away. You potentially have more than 78k in repairs right there on a 78k house. Unless this is basically being sold as a shell and has an ARV of 200k+.

Posting more details about the inspection you already have done would help, but don’t be so quick to jump on the lender here. They may be doing you a favor.

Either a non-BT one that you flip the bolt yourself (way lower maintenance)—Schlage.

Or for a BT one Wirecuttwr recommends the Ultraloq U-Bolt. Have one and like it. Can upgrade to WiFi later for $20.

You have a negative cash flow, you just don’t know it yet (vacancies, repairs/capex, management fee*).

plus you lose the tax-free appreciation you've built up after a few years. Plus a great primary home doesn't always make a great rental (although non-HOA townhomes often do).

So you’re betting a lot on appreciation here, at a time of historic highs and rising interest rates….

* Whether or not you actually hire a property manager, you should pay yourself the 8% or so, or you’ll make bad business decisions by not counting your own labor as a cost.