All Forum Posts by: James H.

Magic meatballs?

This is not necessarily true. Make sure the property is in good repair, screen well and you should not have more than occasional calls.

If you are okay with confrontation it is fine. I don't mean all out, terrible Jersey Shores confrontation (although that is a possibility). I mean small stuff like looking out across the driveway and not feeling awkward when you see the tenant that is unhappy about the late fee you charged him the day before. Some people just can't handle it. I don't enjoy it, but it is okay all the same. For maintenance it is great.

I have come to the conclusion that a realtor does just about absolutely nothing to bring you good deals. I have a realtor that I am working with on a personal purchase and I already see what is new on Realtor.com a day before I get her update. She's a day late and a dollar short. Also, many/most of the great deals are in the secondary market (not the mls) and you can find these deals as good as anyone else -craigslist, driving around, word of mouth, marketing campaign, etc.

The ONLY advantage a realtor brings is access to the mls to verify COMPS. But it is so hard to find an agent that doesn't inflate the value of properties to both buyers and sellers (higher prices=higher commisions).

I'n not saying investor friendly agents don't exist. I am saying, in the same amount of time and with the same amount of effort it would take to find a good and trustworthy agent, you could get licensed yourself. I have decided to get licensed myself so I can access the MLS. It is less than $1,000 altogehter and you can find brokers with very low fees.

So my advice is to become your own realtor like I am planning to do either within the next couple months or next year following my exam for the state board of engineers for my career related license.

I am not a fan of the 15 year note. I have a job and get paid bi-weekly and budget as such. I do bi-weekly mortgage payments (no cost for the privledge) and that alone reduces the loan term by 7-8 years because I'm basically paying and extra two mortgage payments per year. Rounding that payment up some nominal amount each month also will shave another few years off. So, I'm basically doing the same thing as a 15 year note, but it is at my option. I can pull back if times get tight and more importantly, I have a lower debt obligation counting against my DTI. When comparing my strategy to locking into a 15 year, I feel the benefits of the 30 year with the options far outweigh a couple fractions of a percent of interest. But that's a whole different topic.

The more I think about it, the more I think it would be best to keep the paid rental, apply about 30K to my SL's and split the remainder between the car and a DP for another rental. Then my situation will be 30K in SL's, a nearly, if not totally paid off car, two rentals with mortgages and one paid and clear mortgage. Then we can decide if we need another car or not and how to hand that purchase.

It is at this approximately one year time frame too, that my wife wants to have kids, lol!

Thanks for your replies. Great advice so far. Mark Reynolds, doesn't my bountiful youth present itself in my avatar? lol. I'm 33 y/o and I don't mind managing my rental. However, the rental is in a low income neighborhood and I don't know how it will play out over time.

I don't want to owe money on that house. I have a philosophy (not yet tested) that it is bad to have mortages on low income housing, okay on middle range housing and good on nice housing.

As far as the new car, that is TBD. I have a paid off pickup that I can drive if I want, but with my commute, the gas comes out to about another car payment, insurance, maintenance, etc. We can buy used, we can buy cash, whatever. That is not entirely my decision. We live in a big city and I'm not going to drive a beater that might leave me on the side of the road. The peace of mind factor is not worth driving a 2,000 car.

I have trouble with the idea of paying off the exising car note. I think it is just psychological, though. I feel like it would be better to pay off student loan debts with extra money before paying off the car. My SL's are all split up, so I can pay some off and my payment will go down. If I send 15K to pay off the car, my monthly obligation will be reduced by 270. If I paid the same amount to my SL's, it would go down by about 160. So I get more bang for my buck in the 5 year term on the car loan, but the student loans are at a higher interest rate and amortized over 10 years rather than 5. Plus, they dont' do anything for me (anymore). My car at least gets me form a to b. I can sell the car even if it does depreciate and I take a couple thousand loss...I can't sell the SL's. The car will depreciate at the same rate whether I owe money on it or not. At 3 percent interest. It basically costs me 500/year (less each year) to have 15K at my disposal rather than a paid off and still depreciating car. The biggest problem I see with the car note is that it is short term debt that has a greater impact on my DTI.

I'm thinking maybe some combination. Maybe I pay off the car (or maybe pay off a portion and refi the rest into a smaller payment), pay off about 15-20K in SL's, keep the existing rental and use the rest for a DP on another nicer rental. I still have the option to sell the existing rental if I want to change directions with that.

FWIW, I am all in to my paid and clear rental for 26K including a carport I recently added. I have not had any maintenance costs in 16 months except air filters, although the roof is old and the plumbing is cast iron. If I sold it for 35K, I would have 9K profit plus netted 7200 in rents after paying taxes and insurance. So in 16 months I will have turned 26K into 42,200, which is not a bad return. That brings me to another concern, though, if I don't roll that money into another house, I will take an unwanted, possibley unecessary, tax hit....

Hi All, Here's a scenario I would like some thinking power on.

Depending on the choices I make, at the end of this year I may have somewhere around $60K-90K to deploy. Also, at the end of the year, my situation should look something like this:

One recently purchased personal residence (using up about 15-20K of the above funds)
One recently converted rental with 55K mortgage renting for 750/month
One paid and clear rental renting for 550-600/month

My debts could (and will likely) include:

Converted rental mortgage 55K at 3.75% + PMI with PI 260, TI 220/month
60K in student loan debts at 4.75 to 6.8 percent about 650/month payment
15K car note at 3 percent about 270/month payment
Will probably need to buy another car for my wife (cost TBD)

I could sell my paid and clear rental easily for 35K. I don't like these student loans hovering over my head and killing my DTI ratio. If I sold my rental, I could pay all or most of my student loans off and have a big DP for another rental with a mortgage. I would probably end up with a nicer rental in a better area, but possibly not as profitable, and then there is the whole free and clear vs leverage argument. I could pay off my current home to be converted to a rental (55K) but that is stretched out over a long 30 years at 3.75% interest. I could pay of the car, but it is not costing me much at 3%, however, it does significantly affect my DTI ratio while I am paying on it.

I could pay nothing off and try to squeeze another fully cash paid rental into my portfolio, or I could pay some stuff off and put a DP on another rental. I don't foresee paying nothing off as I feel the need to do at least some debt reduction (somewhere around 30K).

I would like to get everyone's opinion on what they would do in this situation.

Thanks!

It's not a home run, but if you live in one side for a few years, it will probably work out pretty good as long as the neighborhood doesn't deteriorate.

You can also access the MLS if you are an Assistant to a Realtor in Texas. Don't know about Ca.

Maybe not as sexy, but in my market you could easily buy 5 single family homes that rent for 1200/month each.

Following the 50% rule, 50% of the rent would be cash flow, the remaining to go to expenses including management, taxes, insurance, maintenance and amortized capital expenses.

If you self manage, you can pay yourself 10% of that 50% expenses. So that would leave you with 1200*0.6*5 = 3600. That comes out to 43,200/year.

It would be easy enough to manage these houses part time. This means you could continue to generate income from your day job and also have that day job to qualify you for mortgages on new purchases. If you stayed within your means, you would also have enough money to buy a new comparable house in cash every two years and not even have to use debt.