All Forum Posts by: Jaysen Medhurst

2 of my favorites:

Millionaire Real Estate Investor - Gary Keller & Dave Jenks

What Every Real Estate Investor Needs to Know About Cash Flow... - Frank Gallinelli

@Mark Smith, $65k appreciation in 2 years is VERY unlikely. Looked at your area and ran some quick numbers. While historical U.S. real estate appreciation is about 6% (ignoring the 2000s run up and crash), you'll be lucky to see 2% outside of Troy in the near future. The most expensive house for sale in your town is $450k. At that price it will take 6-7 years to get $65k. More likely, your home is in the $200k range? That will take you 14 years...

I definitely agree with @Brent Chauvin, don't buy for appreciation. 

2 things to keep in mind:
#1: Duplexes are good for house hacking and resale, but usually stink as stand-alone investments. (Happy to elaborate, but I seem to be writing this in a lot of posts lately and I don't want to bore people).

#2: What else could you possibly do to force appreciation/cash flow? Smart renovations, yes, but is a basement studio apartment possible to give you a 3rd unit? Can your rent out the garages? Are all utilities metered separately?

@Bill Thompson, what class are your units? With a $5k investment in laundry machines I wonder if it's worth it to put inexpensive stack units in each apartment and then boost the rent by $50-75/month. B-class or better tenants are usually willing to pay a little extra and not schlep to the basement or Laundromat.

You could probably get 4 stacks and plumbing for less than $5k (assuming the space allows).

Congrats, @Shahar Haion. I'm in NYC as well. Always great to hear about a smaller investor making it work in this market.

Let us know how it goes with the store front. Renting a retail space is a whole different animal.

Vitaly's point's a good one. Especially, if your units are in the high B/low A range. B-class tenants will love granite (and SS appliances), A-class tenants will expect them.

I'm a fan of quartz countertops over granite. They don't stain, never need to be sealed, don't chip/crack as easily as granite, and if you pick them well no one can tell the difference from real stone. Price is pretty in line with granite.

For 2-bedroom units an upgrade, which I think is definitely worth the money, is a double vanity in the bathroom. Assuming you have the room, they will close a renter in no time. Double vanities have saved more relationships than Dr. Phil. Oh, and don't put natural stone in as a bathroom counter, they're sure to stain over time from the water.

Hey Todd,

My $.02 is to pay off the credit cards. You're right, not a ton of money, and that means you'll be able to save that up quickly for an investment. Plus, if you're paying 15-22% interest on your cards, it will be very hard to find an RE investment to beat that right out of the gate.

One thing to keep in mind with your duplex: they are vey hard to make cashflow, because the expenses are only spread across 2 units. You mentioned above that after you move out the numbers will look something like this:

$1700 GSR

$1289 Mortgage

= $411 cash flow/month

Realistically, your expenses will be much higher than the cash flow. Just using the 50% rule you'll be losing $439 a month. Remember, a lot of the expenses that you absorb as an owner-occupier (yard work, water bill, etc.) must be covered by the property once you move out.

Good luck! 

Hi Bennett,

Good to see you working through your plan and not jumping in blindly.

My 2¢:

Now that you're single why not look at 3-4plexes to house hack? You can use an FHA + 203(k) to purchase and renovate one and use the B-R-R-R strategy. Try to buy it like a flip, i.e. spend no more than 70-75% ARV on purchase and renovations. Then when you refinance you'll have equity built in.

This will give you experience financing, "flipping," and managing a property. You'll know for sure if RE is for at the end of that journey.

This is basically the B-R-R-R strategy (search for it here on BP).

Just make sure you run the numbers every way you can...and then run them again.

The problem with duplexes is that they work when you live there, but if you move out and just hold it as an investment the numbers are VERY hard to make work. The reason being many of the costs you absorb as a homeowner (yard work, trash, "management") and don't think twice about must be covered by tenants once you move out. Having the grass cut costs the same at a duplex or 4plex, but you get to spread the cost over twice as many units.

Good luck and keep us updated.

Hi Lynn,

20% is pretty aggressive. Especially, for your 1st investment. The real question is "what return is acceptable given your other options?" 10% might be great vs. an average return of 7% in the stock market. Unless, the house is in a D area and you spend 20 hours a month managing it.

My other question would be "what does the 10% include?" Is is just cash flow? or are you including depreciation, mortgage paydown, and appreciation? The other 3 are more difficult to nail down, but if you're just looking at cash flow, you're missing much of the larger picture.

I highly recommend Frank Gallinelli's book "What Every Real Estate Investor Needs to Know About Cash Flow..." Really opened my eyes to more sophisticated methods for evaluating potential deals.

Especially, Internal Rate of Return (IRR), which judges an investment against other investments.

I don't think this is a good deal.

Peter's right add 12-15% for repairs & capex. I would also assume at least $30-50 for common electric. 

By my calculations that's a conservative $978.25/month expenses.

$1475/month in scheduled rent

=$496.75/month NOI ($5961/yr)

-$390/month debt service

=$106.75/month ($1281/yr) cash flow

That's only a 6.74% cash-on-cash return. Certainly not good enough for me, but I don't know what your investment strategy is. Figuring in depreciation (another $725 or so/yr) you might see 10.5%. That's better than average stock market returns, but again...not good enough for me.

Doesn't even take into account property management (10% of rent), which would put you in the red. You should plan for that, even if you plan to manage yourself.