All Forum Posts by: Joseph Walsh

I like to put this kind of question into the Suzi Ormann thought chain.  What makes you comfortable.  In the end, money is about making you comfortable.  

That said, Low rates always make me pause when paying off loans over investing.   Sounds like you only have two monthly payments going out, both of which are helping your credit score.  What's the rate and balance on the auto loan, and how much longer?  If its short time left 1yr or less, I'd leave that too, longer, maybe you pay that off if the rate is higher.

$20k is a lot to "save  up" again. It's amazing how, after that student loan is paid off how easy it is to have lifestyle creep and find something else to spend it on.  Then again, paying everything off, adopting a "fire" mentality for a few years, and suddenly you have options.  Again, which one makes you more comfortable:

Paying it all off now, and hoping  you can have the discipline to save back up, and rates don't go up by then, or the market takes off.  Or, maybe it tanks after your "pay off" event, and you now aren't in a position to capitalize. but either way, your $x dollars ahead every month due to the payments being gone vs.

You use that 20k now, get a cash flowing property, but the market tanks and you can't get all your cash back out, let's say, none of it (although, likely to get SOME of it back even in a down turn), but you have a cash flowing property, and the same bills you have now?  So you are $x ahead.

@Shiloh Lundahl just gave some detailed steps regarding the Delayed Financing option.  Although, you'd have to have it as part of the closing contract, it's worth the research.   I haven't done it, but it's been covered a few times in blog posts and podcasts here, and it sounds perfect.

Or some combination. Maybe you can get a low down payment on your next house(fha, va, seller financed), and just bank the remaining cash to roll into an investment property, or like you said, do some sweat equity to up the value even more, and then cash out-refi, HELOC, etc. If I could of sold my old house at a profit(or even not a loss), I would of done that instead of renting it out, since it wasn't bought as an investment. Good luck.

I had to do this with my last house.  We are still renting it out at a slight monthly loss due to timing of some less favorable mortgages on it.  However, the key here, it was never bought as an investment, so the numbers suck.  Bases on your numbers, I don't see how you think it can cash flow.  You really need to put aside 8% for vacancy, 10% for PM (even if you manage it yourself, you might want/need to make a change), and at least 5% for capex (I still use 10% until I hit a certain "fund" threshold per property) and maintenance (again, even if the "plan" is to do it yourself).  based on that:

pm: 160 /mo.       vacancy: $125

capex 80/mo        maintenance? lawn/snow service, weed prevention, clogged toilets?  let' say $25 a month(really low)

160+80+125+25=390

1600-390= $1210  and those are really best case numbers, fudging numbers to make it work is a bad idea.

Now, it might still be worth it if there is an appreciation play.  OR, to rent for a few years and self manage to "pay" to learn  (I learned a LOT by holding my money sink).  However, I think the $40k in equity on the new house could be more useful to leverage on a new investment property 6-12 months down the road., personally.

Not noted here, do you have the personality to deal with tenants?  I found out quickly I was "too soft" and went to a pm.  On the flip side, having self managed a few years, I knew exactly what I wanted in a pm company.  You'll end up paying (in time, cash, or both) doing it yourself first, but consider it paying for the education, then maybe you can transition the property to PM and still make some cash (rent increases, find ways to decrease costs..etc.)

I think there are a couple things. As I have read, the biggest brrrr "fails" have been over-estimating the ARV (or just getting a bad appraisal) resulting in not being able to pull out all you put in. Or over-improving with things you "like" vs. best ROI. Still, many of those are "soft" fails. They still make money, it's still a good investment, it's just not the perfect BRRRR where you reuse the same initial capital 100% of the way from first to last property.

Sadly, all these types of actions have the potential to make the affordibility of rental properties worse in those states, not better.  What, now I can't look at criminal history?  eviction history?  No, I don't think I'll rent down at "market", I'll just wait until the "shortage" gets worse, and I can charge more.  Getting tenants that can afford more, they are less likely to fall behind.  Oh, I have an applicant for my now off market property offering 3 months in advance?  maybe I'll rent it...or No, you must buy it from me on land contract, not rent it.  now it's on  your credit....etc and I can foreclose if it goes bad.  You can always deed it back to me if you really want it as a "rental".  Sadly, this could price out good, hard working people with reasonable but more limited means, because increased risk would require increased reward to justify.  Just going to create a larger gap.  Still, that's one reason to avoid those area's all together, again, making it worse, not better.

 Based on those numbers, it comes to $435 a month cashflow actually, so clearly he's got a monthly $14 expense he's not disclosing, I'm betting on eithre water/trash, or he's splurging on coffee once a week while he looks for the next deal :D  rent is $1250  very nice deal.  Hopefully you can add enough equity to get most of your $30k back out and repeat!

Cleaned up my personal finances.  I wish I would of been in a better position to capitalize on dozens of opportunities I had to pass on when I was just "dabbling"

Interestingly hostile take.  So your perspective is, all working people with incomes should be giving away a few hundred dollars a month to those that are living beyond their means. And if not, they absolutely deserve whatever they get from a punitive and short sited governmental reaction?  Cool, I mean, who'd you give your $200 this month to.  This could work, everyone that works has to give up $200 a month to someone that doesn't, or can't, or wont.you don't get to pick whom you help either, they just call "dibs".  

The point is This IS their job, this is their income here.  And we are already forcing them to contribute to the cost of covering this crisis the same as everyone else that's fortunate enough to be working now...and in the future.  through the tax bill that will be coming.  That's a key part, landlords are already paying for this just like everyone else that has income.   But it's more than that.  We aren't talking about a little contribution, blanket laws like this are saying potentially, "all of it".  Why not just force everyone to work for free for 90 days, well not just work for free, the government has expenses income or not, so actually, they need to work for free, AND chip in some savings to help the economy, problem solved.  Just pass a law.  ridiculous right?  well, with that attitude you deserve what's coming in the next election cycle you evil troll.  Now, all this is amplified of course, but that is really what a blanket law is doing, it is "commandeering" a business by force of law and utilizing it's resources with no compenstation, actions that typically require a very specific set of criteria and are rarely used in the history of this country.

Now, it's probably best for your business if you CAN work this out, to do so, but to have it thrust upon you in a "one size fits all" like the ridiculous examples above, that's where the problem lies, and a sad reflection of whom we have elected over the years.