All Forum Posts by: Kaiser J.

I would argue that the rent they are willing to pay should be irrelevant to your decision.  One year of loan amortization and cash flow is negligible, particularly when compared to getting the purchase price wrong.  The focus should always be on the price first, everything else second.

For example, are they discounting at all due to the current shutdown?  If not, this is exactly the type of investment (early build in a high volume development) you should avoid if you think there is a chance of an extended period of economic weakness.  Obviously the upside is that you could see your equity increase with the progressively higher prices that a builder will charge as the project progresses.  However, you also run the risk of being the early buyer who loses equity as the builder discounts to sell through their inventory during a weaker climate.  These high volume developments make it difficult to distinguish your property from the many others that look similar, so you'll have a tough time arguing the merits of your property versus the comps when the time comes to refinance or sell.  

Using back-of-the-envelope math, let's assume you think you think that the price of this property (or a similar one) could fall by just 3-5% at any point in the next 12-24 months as the weakness plays out.  Compare that number to the 12-24 months of loan amortization and excess cash flow that you collect and you may find that the latter is smaller.  This is before taking into account the opportunity cost, i.e., the foregone returns on the missed opportunity.

@Monique Peterson

There is no single right answer here but I live in Charlotte and am familiar with Irmo because I recently considered buying a medical office building there.  I think that's a solid area to have a rental.  Some people on this site are more focused on near-term cash flow, but my personal objective is long-term equity accumulation and what my portfolio will generate 10-20 years from now.  With that said, I would personally (1) hold onto this house given that your loan balance is pretty small at this point, (2) consider asking the existing lender to re-amortize the remaining balance if you have made additional principal payments in the past, and/or (3) refinance into a lower rate / shorter term mortgage.  

As you probably know, the property taxes are much higher in Columbia when it's a rental property instead of primary residence.  That should be a cost increase that you are able to pass through to your tenants over time, since all other competing landlords are in the same boat.

@Monique Peterson

It will likely be difficult to find a traditional lender who will provide a mortgage for an investment property with an LTV that is above 80%. Many will want to be in the 70-75% range.

Hard money lenders, whether short- or long-term, will want you to bring cash to the deal so that you have skin in the game.  It sounds like the right fit for you here would be an equity partner.  Perhaps someone who puts up the cash for the down payment while you do the majority of the work, for example.

You can. The steps are the same as getting a mortgage for your primary residence, except the bank may be a bit more strict on the terms that they will provide. They may offer a lower LTV and/or higher rate, for example. The bank will also want a well defined answer for what you intend to do with the money. First step will be to contact your preferred mortgage prover (e.g., bank or credit union).

Given that she has no savings you may consider consulting with a financial advisor.  You could do a one-time visit with a fee based planner, for example.  Probably worth the expense to get a professional to look at the full picture and make sure the funds are used in a wise and suitable manner.

Yes, they are amortized over the life of the loan (please note, I am NOT a CPA).  

They will assume it is fully drawn for purposes of DTI. Good second question, I'm interested in the answer myself.

Heartwood Tree is the best in this area.  They are aborists and therefore more knowledgeable than many of the competing services.

Very good summary, thanks for sharing.