All Forum Posts by: Denis F.

Hi, run the numbers for both scenarios and think about your long term goals and risk tolerance:

1. You sell the condo, you pay transaction fees and may not get the highest sales price if the tenant is locked in a long term lease. You will have to pay taxes on the condo gains. You will save yourself from HOA concerns long term and be able to pull all your cash together for the biggest loan/property you can afford. You'll then have all invested on a single property so your risks will be concentrated. You may go up to something like $550k with 25% down, check what you could get for that amount and whether it fits your cash flow and other criteria.

2. You keep the condo and put up with the HOA. Your new investment is smaller but you now have 2 separate properties possibly in 2 different parts of the city. Management is a bit more costly but risk is spread. You can only go up to $320k with 25% down... can you get something that fits your criteria at this price?

I went with the 2nd option myself because I am conservative and like to keep some equity in each of my rentals. Option 1 is higher risks/higher returns as long as the market doesn't drop.

Hi, other than wear and tear, you should be able to take a lot of it from their deposit so it doesn't actually cost "you" too much. I usually ask the other tenants if they want the unopened food and furniture before I move everything else out. Then I hire a company to pickup the excess trash and use their deposit to pay for it.

I try to have a detailed move-in checklist with pictures so that they can't argue too much when I need to use their deposits.

Hi, I would separate the 2:

1. Find a good rental for the purpose of renting, getting cash flow/appreciation, close enough to home if you are going to manage yourself.

2. Find a land for the purpose of the outdoor activities. Criteria are very different (creek, lake, mountain...)

If you try to buy something with all criteria, you'll most likely have to compromise quite a bit and may end up with high vacancies or a tenant who doesn't like to see you every weekend in "their" backyard.

Hi,

For an investment loan, you'll typically need a bigger down payment (25%) and the interest rate will be a bit higher. You'll also need enough reserves (6 months of mortgage payments). So I'd suggest initially some patience and build up some cash reserves.

Your income has gone up already by the amount you collect from renting your 2 rooms, you don't need to double your income for the next loan, although it wouldn't hurt :-)

Another option to consider: you could be buying a new primary home, move into it and rent all the rooms in the house you currently live in. That way, your new mortgage is for a primary home with typically lower down payment/interest.

I agree with @Brent Coombs, try to look a little deeper in your tax return. If you have a tax accountant already, verify that he/she is expert in real estate deductions (track your mileage and expenses, depreciation, loan interest deduction...) and ask for simulations. Personally, I've spent the time so far to learn how to take care of my own taxes. I buy the software (not the online version) so I can run scenarios anytime during the year and figure out what works best for me.

From your numbers, it looks like you could take a $200k HELOC on your home but HELOC has variable interest rate. Since interest rates are still relatively low, you could secure a long term investment loan if you are a long term "buy and hold". I did both: I use the HELOC for down payment and emergency funds and get a 30 years fixed on each property. Then I payoff my HELOC as fast as possible so I can do it again.

My HELOC had no setup fee and the appraisal was paid by the bank so even if I didn't make use of it, I would only have wasted the time to submit and sign paperwork.

Hi,

Although you sign a new lease with the existing tenant, you have to keep the same terms for the remaining of their current lease length if they are not "month to month".

If they are month to month, I'd suggest you look at the tax increase over the last year(s), utilities increase if you'll pay them yourself and anything else you pay as the owner. I got a 18% tax increase from last year on my rental, I will explain the tenants that I am just passing down the increase to them. They can complain to the city if they think taxes are going up too fast.

More importantly, if the tenants have a spotless record and the unit is visibly well cared for, the peace of mind of keeping a good tenant is place is worth a fair discount in my opinion.

If you are a long term "buy and hold", I wouldn't worry too much about getting the rent to market right away. You can always do it later on if the tenants are not too good or if your financial situation forces you to maximize your investment.

Just my opinion... good luck

Hi, without giving more details such your current loans, amounts, equity, goals, target market, type of property... I guess you'll get the answer nobody wants: "it depends". A possible strategy can be getting a large HELOC against your primary home to make what appears as "cash offers" to sellers with quick closing... useful in competitive markets.

@Felipe Hofstatter  Yes, by multifamily, I meant anything with more than 1 unit. They call it "immeuble" meaning "building" and then specify the number and type of units in the ads, often a combination with a store on the ground floor.

I am starting with a 3-plex in St Etienne which is not a very desirable area but should cash flow with 2 very long term tenants. I may add a 4th unit as well in the future. My offer has been verbally accepted and should be signed in a few days.

I also looked at Lyon and some coastal areas in the south based on my vacation destinations :-) but they wouldn't cash flow as well so I want to start with setting up a cash flow stream and then buy where I'd like to retire...

There is quite a lot I can share depending on what you or others are interested in. From market analysis, finding a deal, getting a bank account in France, financing a deal (less than 2% interest for a 15-years fixed loan for a foreign investor!!!), tenants laws, rent control, tax impact on both US and French... I realized I really had to get a reasonable idea of each of those steps to verify whether it was worthwhile for me. I don't want to make a good return if I have to give it all away in taxes.

I am no expert in all domains but after 6 months of focusing my spare time on it, I am getting a clearer idea.

It may better fit under a different BP topic... Let me know what you want me to dig into and I'll share my experience.

Hi Justin, that's what I did. Setting up the HELOC had no upfront fee including appraisal handled by the bank so it just made sense to do it even if I don't use it and close it in 3 years. Now I am waiting for the right opportunity to use the HELOC as down payment or "cash offer" depending on the amount for my targeted property.

It is basically an insurance against unpaid rents. It is very common in France where the landlord can decide to give away 2.75% of the rent in exchange for rent payment in case the tenant stops paying. The insurer looks at the potential tenant profile (job history...) to filter qualified tenants and a landlord could reject candidates if they don't qualify for rent insurance. It is particularly useful when tenant laws are unfair to the landlord... like France.

I'd suggest you think about all possible scenarios (tenant moving out early, landlord failing his/her duties to repair...) and what markets you would get into. Who pays for tenant eviction if the tenant stops paying on month 2?

If you pay up front, the landlord has zero incentive to pro-actively manage the property for the rest of the year. He/she would hire you most likely for the worst units/tenants in the worst parts of town... Makes sense?