All Forum Posts by: Joe P.

What a beautiful home. Simply stunning. If I had the money I'd live there in a heartbeat (and rent out the in-law suite, of course, haha)

I'm sure what others have said is true...its probably priced too high for the neighborhood/market. Which is a shame, some of the finishes I've seen in your home I've seen in much more expensive homes, but that's the way it goes. Nicest house on the block is not always a good thing.

Another good point -- that low of an investment cost screams garbage area/garbage tenants. With you not being able to watch them like a hawk, that could carry significant risk.

All good points above -- I think @Steve Hall said it best asking you what your goal was.

I think appreciation is great and I half agree with Steve -- appreciation is realized when you sell but the rents on these units, ostensibly, go up as the unit accumulates value.

With that kind of cash flow, you want to consider a few things. Can you manage more on your own, do you want to manage more on your own? If the answer is no, you might want to consider selling and moving into a larger investment with management.

Point being, if you're not sure what you want to do here, maybe your goal(s) isn't totally in focus. I wouldn't want to make a decision that didn't align with the direction/end-point I wanted, personally.

Now, if you're cash flowing nearly ~$1000 a month (and this means you have money set aside before your cash flows for maintenance, CAPEX, etc.), and you make $250,000 on the sale of these properties, you would be making almost 21 years of cash flow in a single transaction. That's hard to argue with, but a little misleading. Look at your rate of return on these properties and what it could be investing the $250,000 elsewhere. If you rate of return is better, your cash flow is better, and your reaching your real estate goals...then its a no-brainer.

Personally, I'm a bit more conservative, I don't want to mess with cash flowing properties. I'd rather cash out refi or continue to save for the next one, and the next one, and the next one..

@Patricia Steiner all great points, but I vehemently (but respectfully) disagree with "How many bathrooms? One bathroom houses are obsolete..."

Many folks live in a two bedroom/one bath unit. I have family living in a 4 bedroom/1 bath unit. Our home in Philly has 1.5 baths. My duplex in NJ has two 2/1 setups. The focus on those homes is making the most of that space, but saying its obsolete is quite dismissive.

Personally I like to have enough money to not have to worry about if something big happens. To me, that's about 5k to 10k in reserves; thinking new roof, flood, something. Chances of it happening might be lower, but piece of mind in your operations can be a fine line between success and failure.

Don't forget you'll have closing costs, marketing costs, repairs, etc., off the bat. Don't buy a 100k house and dump the 25% into it and have no money left over. If you've got debt dragging you down, take care of it to at least a comfortable/manageable level. If you would lose it all if the next paycheck didn't come, in my mind you are at significant risk for failure.

Congrats @Shane Means, tell us about the numbers. What's the monthly rent, expenses, etc.? Do you anticipate a lot of appreciation?

Hi @Kibby Twong, I am managing the property myself; I'd like to switch it to a PM soon but I've had some unexpected costs I want to get contained in the fiscal year before doing so. I'm like you -- busy guy with a full-time job, but I'm making time accordingly. That'll end probably as soon as I get another deal under my belt.

Feel free to reach out at any time -- I think I found a good deal (albeit with some flies, nothing is perfect) and I'm sure there are more out there. Need to look real hard since the MLS inventory is low.

To give you a comparison, I bought a duplex in Gloucester City for just north of 100k, and both are 2 bedroom units bringing a total of $1900 per month.

Which property has more of a chance to go up? Which property cash flows? Which property can provide appreciation benefits?

Just because a chocolate bar is out there, doesn't mean it needs to be eaten, nor is it potentially good for your health. In this case, I don't see the value add, I don't see the immediate cash value, and you're going to take 150k of your own cash and lock it up into a property where your net return could take decades.

@Yuriy Skripnichenko doesn't the fire alarm inspection only apply to 4 units or more? I think you can have 1-3 units and not require the alarm system or inspection, if I'm not mistaken.

@John Zent, forgive me, but no, your numbers are not above. Some of them are.

Your goal is to make a high return, but we don't know your cash on cash return. We don't know it because you said your mortgage payment is not an expense, but it is. Not considering it an expense is skewing your view and your numbers. You can look at cash flow monthly or yearly, it doesn't matter to me...but what is it? $100 a month? $1200 a year? Your COCR is your rate of return in my eyes because you're interested in your exit strategy. If it's 2% and your money can do better in the stock market, in a different investment, etc., then its time to pull out. But you don't know that information (or haven't led on that you do) and therefor no sound investor could give you advice until we know exactly what is going on at this property.

Here's what I'm gathering:

• Assuming you invested ~25% (20% down and 5% closing) so ~$45,000 on purchase
• Income is $2000 per month
• PITI is ~$1,211 per month (assuming $752 mortgage, $375 for taxes, $84 for insurance)
• You are setting aside $209 per month for maintenance/repairs

You might be cash flowing around $580 per month, or 15% COCR. But sadly, I think its much lower than that:

• You aren't budgeting for capital expenditures -- you should. A new roof will be 5-10k in the city, a new oven is $500, a new boiler is $4000...your maintenance budget is blown if you're basing it off of that.
• You aren't budgeting for vacancies (pay yourself to deal with loss of income and finding/vetting new tenants)
• You aren't budgeting the utility bills, and you likely pay for at least water
• You aren't budgeting for city costs like license renewals
• You aren't budgeting for your time, potentially, by even having a line item for "management" where you can pay yourself some money for your time.

So, if your goal is the highest rate of return, go through the motion of finding out what that is and report back to us. If its 10%, and you're happy with 10%, great. You can add in expenses for property management if you want to make it more passive, and then see where your return lands. I fear you haven't gone through the exercise (or haven't led on that you have) and not doing so puts you in the dark.

The 1% rule is a bunch of nonsense at this stage, and no one cares if you're hitting it or not. If the property cash flows, meets your needs, and is helping you do what you want to do, then au salute.

If you'd like some help putting the numbers down, feel free to reach out. The BP calculator is excellent, but all in all, I suggest you put down the numbers as-is; its too difficult to make a decision without having all the facts on the table.