All Forum Posts by: Stone Jin

@Sam Rockafellow This seems like a BRRR candidate, why wouldn't your refinance be based on the appraised value?

@Thomas Johnson I think the general rule is you do not want to upgrade more than the neighborhood allows.  If I was renting out a house in a C neighborhood I would modestly upgrade it.  The increase in rent between a 3 and a 4 bedroom will be small.  If you can cost effectively make it into a 3/2, that would probably be the best bang for the buck.  I have a lot of 4 bedroom houses, and have learned that people tend to fill the bedrooms with children.  My 3 bedroom houses tend to have less children.  Generally children will cause more damage than no children :)  Hope this helps. 

@Juwan Parker, every investment comes with risk.  If you are okay with risk then any asset class you feel comfortable with is fine as long as you understand the downside.  If you don't want any risk, then a separate checking account would suffice to get to the first 25K.  Putting money into the markets is not saving, it's investing/gambling.

3% to the agent for bringing the buyer. I think most FSBO sellers would expect to pay that if a realtor brought the buyer.

@Lisa Maturo The reality of it is that equity goes up and down, by taking money out of the house, you've locked in the profits at some point in time.  I suppose you will need to take the leap of faith at some point.  From what I can tell, even with 20K in cash you will struggle to find properties in Phoenix that meet any kind of cashflow criteria.  I'm not sure how you can grow cashflow and portfolio at a sustainable pace without figuring a new source of capital.  

If your ultimate goal is to replace your income of 100K a year with rental income you need roughly monthly cashflow of 10K. From what I can tell you are probably at $1500 a month total so you have a bit further to go. The question you should be asking is what can you do with the 180-200k cash after you refi, can you make a spread on it vs the interest rate which is probably 5.75% for a conventional loan. I'm not 100% certain the average investor can do it in Phoenix. In theory you can take the cash out and buy another house with cash and BRRR for awhile. What you will have at the end of the day is likely a little more cashflow than today but with way more debt and few more doors.

@Scott Anderson I would figure out what your criteria is for investing.  For example, ours is $400 cashflow, 10% cash on cash return, house must be something we would feel safe living in ourselves.  I can't find that in Phoenix anymore so I stopped acquiring in Phoenix.  I'm currently investing out of state where I can meet those criteria.

You can spend money to buy cashflow but if that is the case why not just buy a note.  You don't have the downside risks or upside benefits, you maybe can get 7-10% on your money all passively.  

@Lisa Maturo I would say you have a problem most would envy.  Is your plan to continue investing in Phoenix MSA?  We are facing a similar dilemma whether to use the equity in our existing portfolio or use our cash reserves.  In your case you would likely be better off refinancing out of property 1 as you will still be able to cashflow significantly even after doing so.  After you money up, you now have 200K to invest which opens up a lot of options.  With just 20K I'm not sure what options you have even out of state.   

I can't speak for west valley or north valley but in the east valley the returns are not looking good.  the amount inventory sub 200K is limited and questionable.  I would say the going rent to purchase is right around .6 so a 200K house rents for 1200-1300.  If you plan on taking out leverage your cashflow is going to virtually $0 in my opinion as an AC or any major repair would wipe out years off cashflow.

@Michael M.  I guess the answer is complicated, I have two jobs (real estate and IT consulting), in real estate I have no employees but I have a team of realtors lenders maintence handymen contractors property managers that work with me to make the magic happen.  In the IT world I'm an individual contributor but generally as part of a larger team.

The point that I wanted to share was that in 2009 I was unemployed in my consulting for about 9 months.  In hindsight I should have taken a job that was beneath my high expectations and for those 9 months I could have made 30-40K lets say.  If I had an extra 30-40K to invest in 2010-2012, I would have being able to buy 2 additional houses which would have yielded an additional 200-250K in appreciation in today's market.  

I just hope you don't look back on this period of your life and say hey if I just worked the bus driver job I'd have gotten an extra 30-40K in extra dry powder to invest.  I think the smart money all think a correction is coming and are building up their war chest for the coming buying spree, I just hope you are building up a war chest too.  Good luck with your future endeavors.

@Drew Donovan I have a similar circumstance as you in that I invest in a large MSA, there are 1000's of units of luxury rentals that are being built in the Phoenix suburbs to the point where I'm thinking it's over built. I own condos in the market and the last couple years have been great, rising tide raises all boats as my rents are now much higher. My product is a B in an ocean of A so I know that when the tide goes out and the A class rents drop, the b class rents will drop faster. I'm considering selling a few now to realize the appreciation and would not look at additional product that will one day have to compete with the A stuff in the current market(when the prices readjust I may reconsider). I guess my point is current trend is not the forever trend, and while in a strong economy the HOA is strong, what would happen in a weak economy when 1/3 of the owners can no longer pay the dues (the dues will increase as I have seen in several different communities we own in during 2010). My point is just be cautious in an environment of raising interest rate, potential market readjustment and a high competition. Good luck with your endeavors.