All Forum Posts by: Kevin S.
Kevin S. has started 24 posts and replied 394 times.
Quote from @Marci Stein:
I would never invest in anything that doesn’t pay me. What would be the point.?
Quote from @Jaron Walling:
@Kevin S. We're experiencing the same thing and we live in a cash-flow market (historically speaking). I guess the tides have turned. Properties that make sense financially (as a rental) are challenging to find right now. We're unwilling to except what the market is providing. I'm unwilling to spend thousands per month on advertising, letters, and lead generation. I'm unwilling to except a negative cash-flowing rental. Unless a property with opportunity crosses my path from the MLS, off-market, or a wholesaler we're not buying it.
@Jaron Walling My guess is you are probably spoiled having gotten into the RE market before this high tide? What is a novice to do in the current market? Just trying to find a way and not wait for the next tide (God knows when) :)
Quote from @Jaron Walling:
@Theo Hicks Excellent example!
@Kevin S. 10 years... now you're talking :-D
:) :-D
Quote from @Carlos Ptriawan:
Quote from @Kevin S.:
Hi BP members,
I am looking to invest in a SFH that cost about $400,000. With 20% down the property will negative cash flow $500/mo. It breaks even @40% down. One lender advised me it's better to negative cash flow if I can afford it and still do 20% instead of 40%.
Reason : the additional 20% or $80,000 is better spent towards down for another property (provided of course I can afford twice the negative cash flow) because the annual appreciation @ 5% (which is likely in Florida) will be greater than the negative cash flow per year. That is $6000 negative cash flow for $20,000 appreciation in return. That is still a 17.5% return(capex not included). I don't discount the possibility that the lender gets to finance 2 properties instead of just one but the proposition does make sense on paper and in theory. Does anyone refute this or agree with it? Am I missing anything? Thanks in advance.
- 20 vs 40 it all depends on your experience
- in-state vs out-of-state ?
- the appreciation changes every year, are you in market where it's above nationwide appreciation or below, that's one of the key factor ?
For me, 40% with DSCR 1.0 only worthed if I can use it as STR. Such as in Tahoe or Hawaii.
But for LTR, I would just invest at debt funds.
If rate of return of appreciation from equity is half than debt fund return, then I prefer debt investment.
Personal choice though.
Thanks Carlos. I have no experience with debt funds 'returns' and will look into it now that you mentioned it. Having properties with tenants will always get you rent when the market goes south until it recovers. How do debt funds perform when stock market go down? Do they move parallel?
@Theo Hicks
Thanks for your input Theo. Your numbers are accurate to the dollar. Can we re-calculate based on holding for 10 yrs and doing a 1031 at the end?
Quote from @Account Closed:
Here is an update after a recent visit to a building in South Beach Miami, FL. I confirmed with the HOA president that the building has passed it's 40-year inspection and had no violations. I also walked the property at this location and found it to me in excellent condition. Periodic maintenance has been done and the building has been well maintained. The board president also told me that the HOA has reserve funds. Several units are for sale here one is asking $295,000. for a 1/1 at 650 sq ft. This includes 1 off-street parking spot - which is very desirable in South Beach) HOA is $802 and taxes (with no exemptions) are $3192. I did a quick search for rent and this unit would rent for around $2500 per month. I know that this may not be for everyone but would like to encourage discussion on this as a potential investment. Thanks in advance for your comments.....
Wouldn't this property negative cash flow by about $400/month with a 20% down payment? Is my guesstimate wrong?
Quote from @Henry Lazerow:
Never buy anything that negative cashflows make sure it at a minimum pays for itself. I would always put as low as possible down to where its not negative cashflow. Maybe look at 2-4 units atleast here even in the trendy nice parts of chicago 2-4 units still cashflow positive.
Quote from @Jaron Walling:
"This strategy requires a solid financial buffer to handle the negative cash flow and any unexpected expenses" - If you don't have war chest on top of purchasing the properties I'd never consider buying them. You have more to lose and less to gain in my opinion. The entire return is based on an unknown.
No matter how much you try nobody can control the entire Florida market. Just because a few people say appreciation will be 5% doesn't mean it will. I'd look for properties with break even (minimum) or positive numbers.
Thanks Jaron. I can't seem to find any property with better numbers in the market where the growth is i.e all the major cities and surrounding suburbs in Florida. There are ones with better numbers but they are in smaller towns where tenants may be harder to replace and appreciation lagging. Trying to stay local but may have to consider out-of-state which I want to avoid if possible when starting out.
Quote from @Chris Seveney:
@Kevin Si
Yes appreciation is not guaranteed and it clear your realtor has less than 10 years experience
What if you have 0 appreciation and your taxes and insurance double over next 3 years? What do your numbers look like then
Have you analyzed worse case scenarios ?
Thanks Chris. Yes, my realtor is less than 10 yrs. Believe it or not, I also get automatic emails from another realtor who's been at it for closer to 25 yrs, featured on one of BP podcasts who run a real estate and property management company in Florida. All properties I receive from her cash flow (barely) at or about 35% DP! Trying to figure out if it's Florida, the realtor(s) or me!!
Quote from @Bjorn Ahlblad:
Don't buy your own cashflow! 40% down just to get cash flow is not sensible math. Instead have the money available for more investment opportunities, unforeseen needs and emergencies, personal and otherwise.
Thank you. I concur. Stick with 20% DP with negative cash flow for the appreciation and mortgage paydown by tenant OR wait for lower interest rate? Or go for duplex with 20% DP, $100-200/month cash flow with deferred maintenance? All duplexes I see are not in good condition.