All Forum Posts by: Leo R.

"please plan better next time"?  Haha; the guy got to 1.3 million in equity and 8k/month cashflow in 2 years...I'd say that's pretty excellent.

He asked a legitimate question about a topic that is nuanced, and which lots of people don't understand very well, but I don't see any evidence that he "didn't plan well" (quite the opposite, actually).

@Nathan Anderson  I've been grappling with similar questions myself (I've got some good cashflowing properties with strong equity positions, and I'm always grappling with the sell vs. hold question).

It sounds like you have very, very good cashflow with this property, and a strong equity position (congrats on both)... I also assume that you locked it in at a low rate back before rates went up?

Personally, I'd be hard-pressed to sell a good cashflowing property that's locked in at a low interest rate (particularly as we move into an era of high interest rates and high inflation)...I'd probably only sell if selling was absolutely necessary to get me into a new deal that was exponentially better than the house I had, AND which had very, very little risk of failure. In summary, only walk away from a clear winner if it's absolutely necessary to get you to an exponentially better (and very low risk) winner...but, that's just my own opinion and your mileage may vary...

To your question about whether there's a particular formula to help you decide whether to keep a cashflowing property vs. sell it, I'm not aware of a specific formula for that (but, I'm also not an accountant or a finance wiz)....however, when I hear investors discuss this issue, it seems like they often reference return on equity, and mention how RoE is one metric that's important in their decision of whether to keep a cashflowing property vs sell... If you haven't already done so, I'd suggest reading up on RoE--it might provide some new perspective to help you make your decision.

I'm an investor in Salt Lake; let me know if you ever want to talk shop.

Good luck!

This is an excellent question, and I've also wondered about this...personally, I pass the utilities costs on to tenants, so my hunch is that the money the tenants pay for utilities could probably also cover the cost of a solar system (or at least offset a large chunk of the cost of the solar system)....but, I've never taken the time to run the numbers to know for sure...

Although I don't have an answer to your question, one consideration that may be important is the age of the roof--I would assume that once the solar panels go on, it would be a pain to remove them to replace the roof (plus, if you remove them to replace the roof, where is your power going to come from while the roof is being replaced?). Based on that, my assumption is that it would probably make sense to only add solar if the roof is fairly new (or, if the roof is old, replace the roof and then add the solar)....or, if your lot is large and appropriate for it, put the solar panels in the yard and avoid that whole mess...

I'll be interested to see if folks have any good answers to your question...

@Conner Olsen  thank you; that's very useful info! (and frankly, it makes me motivated to explore shifting my portfolio to include some MTRs)

Few quick follow-up questions:

First, how do you advertise your MTRs/how do you find your MTR tenants?

Second, the numbers you described are excellent returns...I'm not super familiar with Austin's market, but I was surprised to hear that you can get a 3/2 for 400k that works as a MTR. Here in Salt Lake, 400k would not get you a particularly nice 3/2 anymore (and I've always assumed that if anything, Austin is a pricier market than Salt Lake)...so, my first question about that is: what grade of property and neighborhood does 400k get you in Austin for a 3/2?  Also, presumably most MTR tenants are single people or maybe couples who probably don't need 3 bedrooms--with that in mind, is there a reason you would target a 3/2 for your MTR rather than a 2/2 or even a 1/1?

Thanks again for your insight!

@Conner Olsen I've always been interested in MTRs--can you elaborate on that a bit?  

For instance, who are the tenants (other than traveling nurses)?  How much vacancy do you have between tenants?  What type of property makes for a good MTR, and what type of property would be a bad MTR?  How are you advertising for MTR tenants?  ...and any other important lessons learned about MTRs would be greatly appreciated.

Thanks!

Correct.  If one's financial success or failure hinges on a property appreciating in the future, then they probably shouldn't buy the property.  Appreciation is not guaranteed, and it is possible for a property to lose some or all of its value (look at Detroit). There's a fine line between buying a property with the expectation of appreciation and speculation.  

Some people are in a position where they can afford to make some speculative purchases (e.g.; if someone with a net worth of 20 million buys a 100k property and the property tanks in value, that's probably not going to ruin them).  But, if someone with a net worth of 50k buys a 100k property, and their success hinges on that property appreciating, they're walking on thin ice IMO.

Unless you have plans to somehow force appreciation of the property and/or force it to cashflow (e.g.; via a rehab or splitting a single fam property into multi fam), then using a HELOC for a downpayment on a non cashflowing property may not be a good idea (and even if you do have plans to force appreciation and cashflow, this type of maneuver probably isn't advisable unless you're highly experienced with investing and rehabbing). HELOCs are adjustable rate, and we all know where rates are going...if the property isn't cashflowing, you have debt service on the mortgage, AND you have debt service on the HELOC, how are you going to stay afloat? (much less make money?).

At the end of the day, it all comes down to money in versus money out. If the property isn't cashflowing, and if you can't force it to cashflow, then the only way for it to make money is through appreciation--and if your plan is completely dependent on appreciation, you are speculating (which can bankupt a person very quickly).

Good luck out there!

@Ryan Lloyd What Logan said is completely correct; the only way to find cashflow in most areas of Utah right now is to either find an incredible off market deal, do some sort of rehab where you turn a non-cashflowing property into a cashflower (for instance, splitting a large single family house into multi fam), or get cashflow via STR (which is much more labor intensive than a long term tenant, and is illegal in many neighborhoods around Salt Lake City)....I wouldn't say it's completely impossible to find cashflow these days, but it is very, very, very hard to find it (and often requires significant work); turn-key cashflow doesn't exist around Salt Lake right now....

Personally, I would not suggest buying a property if appreciation is a do-or-die requirement for your plans. Although there are valid arguments that the salt lake area will continue to appreciate, there are also valid arguments that we will not appreciate and that prices could even go down...ultimately, nobody knows for sure what will happen, and if a person's entire plan depends on future appreciation, they're speculating (not advisable for anyone, particularly a new investor).

Good luck out there!

Also, the title of Don's post says he's a new investor--if he has little or no experience, then a single family house would presumably be a much easier learning curve than multifam, commercial, industrial, etc....

@Don Johnson mentioned that he's more focused on building equity than cashflow.

Generally speaking, around SLC, I think that single family properties have appreciated more than the small multifam properties...  If I'm correct about that, then single fam may be a better route than small multi fam for Don...  of course, who knows what will happen in terms of appreciation (or depreciation) in the coming years...there's a fine line between investing for appreciation and speculation, as they say...

Having said that, I have no clue about the appreciation of large multi fam,  commercial properties, or self storage around SLC...would be interested to learn about those if anyone has info, though...