All Forum Posts by: Kevin S.

 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.

@Jonathan Pflueger

Thanks for your valuable input.  Here's my feelings but mind you I admit I am not a seasoned investor(which is why I posed this question in the first place);

Since it is Florida where a net positive migration will be in the works for a long time to come I believe the appreciation is more likely to happen than not.  May not be 5%.  A 4% will be more conservative.  Realtors can chip in here for past history and future trend as I am no expert.

Second, $6000 annual cost (towards negative cash flow) is but a small fraction of $80,000 additional monies that otherwise would go towards DP just to break even.  If I can afford the $80K I probably have the reserve to cover negative cash flow.  If that makes sense.

Before I take the step I wanted input from experienced investors like you and other BP members.  Thanks again, Jonathan.  Awaiting more comments!

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.

@Salvatore Lentini

Very true.  While I know there are many successful investors who started as novice or even 'accidentally' there are many who have had an edge or advantage but do not reveal it, such as:

1.  Used to be and still is a real estate agent/broker.

2. Has construction background either working it or if not, has family who is in construction.

3. A friend/neighbor is contractor/construction or even a whole seller/realtor that introduce to real estate investing.

4. Starting as a business that came with real estate is an easier start than someone who has a W2 job.

5. Not many people are able to house hack for various reasons. 

6. Real estate handed down thru family after their passing.

7. I know of a lender myself who I was talking to about getting into REI just bought his first duplex. Being a lender definitely give an edge as one knows all the nuances, the ins and outs of fundings compared to someone like Melinda Francis (another post) that her biggest fear that stops her is not knowing anything about funding. While that can be learned, one may argue, the point is about some people having the edge which an entirely W2 person do not have.

8. Others with different 'stories' I haven't thought of...

While I don't have any stats, I think the number of investors that started off with an edge or introduced in to with help/information is no small number.  People with no one to turn to have the hardest time taking the first step. But then what do I know :)

1.  Property management(company).  Especially the first one where you don't have enough properties to hire one and you don't want to do it yourself bc you're busy with either your W2 job or your business.

2. Not knowing the market enough.  In terms of demand, appreciation, changing neighborhood(affects the value of your property) etc.

That means each property need to be separated in into it's own LLC (if combined initially) once equity reaches a certain amount. Is there a magic number that attorney won't bother to sue?

Do attorney find a property with loan/debt an unattractive target vs one with high equity?

If so, should equity not be allowed to exceed a certain amount for that reason?  By that I mean not to have a paid off property ever to make it less attractive.

If no, then it's insurance money they are after.   

Is there a way attorney can find out what a property is insured for?  Ironically it seems that the better you are insured the more likelihood of getting sued.   

@Jason Bott. Thanks. Never realized lender would require LLC but it makes sense given the size of portfolio. I assume the umbrella coverage has to equal or exceed the equity of all the property within that LLC?

@David Krulac

Your input was insightful.  Thank you.  You did not mention multi-family in your portfolio.  Is that something you stayed away from?

The 4% vs 5% is definitely an information I didn't know.  That helps.  Thank you. 

Thanks for your input. While it is true with owning land and possible ADU in future, I have no plans to add any ADU and land is not important to me. I want to know strictly from numbers perspective. Dollar to dollar ROI.