All Forum Posts by: Scott S.

 Scott, I wasn't linking the article for people to take advice from it. This thread is about media hyping up things and this article came across my news feed that same morning. Just from my experience in my own local market I could tell this was an over inflated piece of hype. Maybe it hold more weight in other markets but I find it hard to believe its anywhere near the extent that this guy makes it out to believe. 

@Jay Hinrichs I have not heard of Bruse Norris before. I will be looking into him. 

Since we are talking about media is posting their torches and pitch fork articles everywhere I came across this one this morning. 

https://www.marketwatch.com/story/why-bubble-era-h...

I don't know enough about mortgages to argue either way for this article but I thought it brought up some interest facts. The residential market might not cause the next crash, but if this article is right, it could effect the SFH market. And of course, like everyone one else, he throws out his timeline for the apocalypse.

Little late to the thread here but I can verify that Chelan WA is one of the best vacation rental destinations in the Pacific NW! I'm continually blown away by how well many of our properties there perform. Especially the waterfront ones. If you have a waterfront 4+ bed home, you'll have 100% occupancy during the summer (with fixed turnovers!), mainly from large family groups coming from Seattle.

 I've heard back from 1 of the 3 that actually said they would look it over and get back to me. In short they said that we could probably figure something out. They said they would need more detailed info on both me and my partner on this before its a firm yes but at least I got a potential yes. 

The terms they laid out is what has got me in a bind atm. Basically I got kicked out of the residential land dept. and sent over to the commercial dept. They laid out a 65% LTV, 15 yr am, 6.5% (min.), & a 1.5% bank fee. Now I know I'm new to these type of land deals, so I guess I shouldn't be surprised at this, but a 35% DP is WAY bigger than I was originally thinking. My mind was in the 20-25% DP range, not anywhere close to 35%. So at that point my DP would be ~$130k, if the sell accept my current offer, which is way more than I have and really at that kind of cash makes me wonder if I should spend that elsewhere in a different investment. If I could have a lot sold at closing then I could have that kind of DP no problem but thats a big IF and I doubt the seller would keep pushing back closing till I could have a lot sold. So I'm still go to hold out and see what the other two banks have to say and try a couple others I got from other people today but I'm sure they are all going to be something in that ballpark of a figure.

You know your house, @Mike Bales. You need to take into account any future capital expenditures (capex) that it will need (roof/water heater/furnace).  What types of routine or emergency maintenance will it need (water leaks / exterminator / smoke & CO2 detector maintenance / air filters / gutters / outside maintenance / paint / flooring / refresh between tenants, etc.). Will you mow the lawn yourself, or hire it out? Will you manage the property yourself (and take calls at 3am) or hire it out? You should set aside some money every month (from the rental income) to account for these items. These are called variable expenses, and as the name suggests, the cost will vary. Wildly, sometimes! Some investors use a percentage of the rent (10% for capex / 10% for Property Management / 5% each for maintenance & vacancy). You may use different numbers -for example- if you just replaced your roof.

You've already accounted for your mortgage payment. If that payment doesn't include taxes and insurance, you need to add that into your monthly expenses, as well. You'll want to pay your water/sewer/trash (don't leave that to the tenant), so count that as an expense as well. These are fixed expenses.

Then take your total income less your fixed & variable expenses:

$2200 - Monthly Rent
(220) - Capital Expense (roof, etc.)
(220) - Property Management Fee (you could do it yourself)
(110) - 5% Vacancy (money set aside each month to cover future vacancy)
(110) - 5% routine/emergency maintenance
(150) - Water/Sewer/Trash (I pay ~300 every other month in Tacoma)
(1600) - Mortgage (hopefully includes PITI)
(210) - Negative Cash Flow/month.... 

There are great calculators on here... and I'm literally GUESSING at your numbers, but this is what you need to be analyzing. There are tons of variables involved, so use your best judgement. Look over the calculators on BP, and find some like-minded people at Meetups, etc.

Good Luck!

Thanks @Thomas S. We purchased the home for $220,000 about 8 years ago and it's currently valued at $360,000.  We still owe about $190,000 on it.  Does the 1% rule apply to purchase price or current valuation? 

I got the $600 positive cashflow based on our monthly payment of $1600 (principle, interest and taxes) and being able to rent it out for $2200. If my math is missing something please let me know.  Appreciate it!

I lived in Tacoma for 30 years and know that market well.

I would not worry about Port Orchard.  You are protected by the demand driven by the naval base.  The investors that need to be worried are the high flyers investing in luxury apartments in Seattle.  They will be the first and hardest hit.  (It is already happening in San Francisco).  If Boeing or Microsoft were to leave, the high flyers,  who lose their jobs, would move down INTO your apartments while the leaving the luxury properties vacant.   Class B multifamily did well during the '08 crash.