All Forum Posts by: Lori Edelman

Quote from @David M.:

@Lori Edelman sounds like you need to sell.  Not entirely sure of your market and landlord/tenant laws in PA, but probably sell when the tenant it out.  The market is still strong with homeownership in my area and we aren't that far apart.

Yeah, hindsight is 20/20.  Who knew the public markets would soar with double digit+ returns for the last 20-25 years!  Just more options to look at, especially if you investigate other investing strategies.

Anyway, hope this bit helps.  Happy to chat.  Good luck.

I suppose this is a “cut my losses” type situation. It’s just frustrating that the place hasn’t appreciated in 19 years, and there isn’t even anything wrong with it or the area, and I’ve never even been able to break even. It goes against everything you hear about real estate investing. No cash flow OR appreciation. 

Quote from @Alakai Richardson:

You could do a lease option and still collect rent without having the responsibility of taking care of it. so maintenance costs you 0

Can you please clarify what a lease option is?

I bought a 1 bedroom condo in 2005 for $135k. It’s just outside of Philly on the “Main Line”. It’s an affluent area with blue ribbon schools in a great location within walking distance to town and the train station into Center City Philadelphia as well as the suburbs. By being outside the city (the city line is a few blocks away), you save on city wage tax. 

I've been renting the condo out at a loss since I moved out in 2007 because it was underwater for a long time. I couldn't even refinance when rates were low. Back in 2014, a mortgage appraiser valued the home at $85k, comparing the condo to an REO property and a co-op in another town since nothing in the complex had sold in a few years. Everyone was holding on to their condos like me. Since then, I've paid several special assessments, replaced the HVAC and hot water heater twice, and absorbed tax and HOA increases. Back in 2005, I was able to charge about $1050 for rent and now I was finally able to increase to $1250 because rents in the area have finally gone up. I'm still not breaking even but not losing a ton.

FINALLY this place is nearly paid off. In hindsight, I’m certain that I would have done better putting my money into an S&P index fund (even with tenants helping pay down the principal) but you know what they say about hindsight…


I was excited to see that two 2 bedrooms in the complex have sold for a record price (for the complex) at over $200. I was excited and thought that this would be the year to sell. Using square feet as a basis, I estimated that this meant that my condo could sell for around $170k. However recently a few 1 bedrooms sold for around $130k…still less than what I paid for my 1 bedroom!


I’ve been talking to the listing agent for the 2 bedroom that went for $220k. The owner had to spend about $25k to get this much for their condo.  For a “typical” home, $25k would be reasonable, but we both agree that it’s not worth putting more than a few thousand in - if that. And he won’t really suggest a listing price, other than to say that a few 1 bedrooms went for $130k recently. My unit has a few things going for it, such as being on the top floor. It is well-maintained and there probably wouldn’t be many inspection findings. However it doesn’t have a garage space and kitchen has the old 80s cabinets (realtor says that we can paint them). Appliances are newer.

Do I cut my losses and just sell the place? It kills me to lose money after so many years of effort but I could at least have a down payment for perhaps two income producing rental homes that might actually appreciate one day (in a totally different state that is!). If I keep the condo, it will be paid off soon at which point I’ll get about $800/month in income (not factoring in maintenance and turnover). If all I did was sell and put the money in a high yield savings account, I could make nearly that much with no effort. 

If I do sell, would it be worth waiting until the renters move out in the spring (I would need to terminate the lease)? I would make some minor updates then (eg painting kitchen cabinets). I fear that I wouldn’t be to sell after terminating the lease, or that I wouldn’t get more money for the condo and now I’ve just spent more than I needed to. On the flip side, I could probably update the cabinets while the tenants lived there, and tell them that if I don’t find a buyer, at least they will have a nice looking kitchen. 

Quote from @Jon A.:

If you don't have a plan or way to pay the HELOC back I would not do it. You will probably end up refinancing the new purchases anyway to pay the HELOC back at some point. So you may as well just do it now. You also have to factor in that your HELOC being maxed out will affect your credit and DTI. Buying another home with a maxed out line of credit may prove to be an issue. Maybe a lender will chime in on that point. HELOCS are also tied to a variable rate that you have no control over. I would consider a cash out refinance to get those funds. Then, that money is yours. It will reset the amortization of your current loan but it all depends on what your goals are and how quickly you can achieve them.

Thanks for the feedback! Very helpful. I figured that the HELOC would be paid back using rental income, but you are right about it coming with its own down sides. I think that some HELOCs are actually interest only until they are due after a number of years. It was attractive because of the flexibility involved - borrowing what you need as needed. The thing about a cash out refi is that you have to borrow a set amount. Not worried so much about the rate because we don’t owe that much.

Quote from @Account Closed:

Quote from @Lori Edelman:

Doubled? Our home is in Northern NJ (about 7 minutes from NYC). This is not an emerging or undervalued area. We paid $650k and now it’s worth about $850k-$900k. It’s a highly sought after, stable area, with lots of competition for housing.

If your house sells for $900k your real estate fees at 5% would be $45,000. There are other costs, but that is a big one. If you lived in the property for 2 of the last 5 years, you get a tax break on $500k of appreciation and pay gains on the rest. To buy a new property can be $15k based on loan origination fees, title, escrow, inspections, appraisal and so on pus the investment of time to find the correct property. Don't shoot me, "I'm only the pianoman". I just run numbers.

 Yep, agreed with all of your  comments. So many costs with selling our home and buying another, it’s approaching the amount of the capital gains tax that we’re trying to avoid. All of these costs are part of reason I figured we just keep the current house…

Quote from @Joshua Christensen:

@William Dorrough

Does NY allow owner financing on real estate deals?  These are often referred to as Subject To deals when there is an underlying mortgage.  If there is no underlying, it's just owner finance.  You'll need an attorney to draft the Note and Mortgage if so.  We use title companies for our closings in NM, so they usually have an attorney in the wings to prepare these for us.  I'm not sure about NY, you'll have to seehow your closings are handled there.

I do a lot of these back here in NM and they are a fantastic solution to lower down payments, negotiating terms, interest only options, lower down payments, etc.  No bank involvement until you buy the seller out in a few years on a refi.  

Find nice value add properties and force appreciation through improvements be it physical or cash flow, ideally both.  

On 5+ units these are commercial loans, so you can typically refinance these out of owner finance inside 2 years if you buy right.  

Hope that helps.  

The challenge I’ve found with many S2s is that they rely on appreciation and very large balloon payments. You’re also paying a premium for the home. I’m old enough to have seen the housing market crash a few times. I did recently buy an S2, but the seller had very little equity, so there is no balloon.

Doubled? Our home is in Northern NJ (about 7 minutes from NYC). This is not an emerging or undervalued area. We paid $650k and now it’s worth about $850k-$900k. It’s a highly sought after, stable area, with lots of competition for housing.

Other areas that have doubled may very well go back down. I lived through the market collapse of 2005 and have another property that’s just finally recovered its value (before I bought it, the value had nearly doubled). So I wouldn’t use recent gains as a benchmark for where to buy investment properties. I would look more at things like job and population stability and growth if I were to buy somewhere else.

You make a good point about capital gains. I was thinking about this in the long term. So say my kids inherit the house, the cost basis is what it is worth at the time of inheritance. I suppose we could also sell it within a few years too and wait to make sure we don’t want to move back (the IRS doesn’t charge capital gains if we sell within a certain time frame). We may also be able to use some creative tax strategies on future real estate purchases to offset capital gains.

So what you're suggesting is a hybrid of mine and my husband's ideas if I'm understanding correctly? We would sell current house, buy and rent out a property that we take a HELOC out on and use the HELOC funds to buy additional property? Or at that point, is it better to use funds from our home sale as down payments on the multifamily and other properties? Maybe the answer just depends on where we buy and cash-on-cash/ROI.

Hoping to get your input into a debate between my husband and I.

We purchased our home 10 years ago at a fairly low rate, and our realtor thinks that we can rent it for about $500-$1k more than our monthly payment/expenses! That’s pretty good here in northern NJ, where it’s much cheaper to rent than own with a typical mortgage. The house will be paid off in about 4 years, at which point, our monthly cost will drop and we can rent it for about a $2500-3k profit (capex/maintenance and rent appreciation aside).


I would like to rent our house out and take out a HELOC (about $500k-$600k) to purchase more real estate, including a multifamily for us to live in using new Fannie Mae program. This way we ultimately would wind up with our current home, a multifamily, and perhaps a few other out of state rental properties and we'd even have income coming in from our current home.

My husband doesn't understand why we would keep our current house. He prefers to sell it and use those funds to buy the other properties. I explain that at the end of the day, we would wind up owning our current house in addition to the ones we are buying - more wealth/equity - but he doesn't see it that way. He doesn't understand why our house is so special that we would want to hold onto it. He wonders: if my strategy is a solid one, then why wouldn't everyone then just buy a home and then take out a HELOC against it rather than using their funds to buy the properties they want. I explain that people do do that, but since we already own this home, it makes sense to keep it and take my approach.

Obviously there are costs to selling our house and we have a low rate locked in, but he doesn’t want us following my strategy simply because we would be avoiding selling costs and getting a better rate (we only owe about $95k on our house so rate isn’t a big factor).  

SO, what do you think?? To A) keep, rent, and take HELOC on the current house to buy our next properties or B) sell the house and use funds to buy our next properties?

I see a lot of people posting about Detroit. I've been focusing about an hour out, in the Saginaw/Flint areas. Good cash flow. Anyone else focused there? I've heard about a lot of squatting issues in Detroit.