All Forum Posts by: Aaron Wright
Aaron Wright has started 1 posts and replied 5 times.
Post: A successful (barely) first flip!
- Investor
- Collinsville, IL
- Posts 5
- Votes 0
You didn't list how much you spent at Blues City Deli whenever you had to visit the property.
Just kidding, and well done. Great post also!
Post: Pay which houses down first?
- Investor
- Collinsville, IL
- Posts 5
- Votes 0
Originally posted by @Charlie Fitzgerald:
@Aaron Wright The posit was if the rates were the same, which loan would you pay off first. My example does not assume same balance...it presumes same rate.
Your statement is incorrect. 150k of debt at 10% in one loan has a much higher carry cost than 150k in 10 loans at 3% does.
Your post assumed level interest rates, and so I continued with that assumption.
If you have 1 loan at $1 balance, with a 3% rate, and another loan at $149k, with 3% rate, and you wish to pay down $1 of debt... It doesn't matter where you put that $1. Next month, you will still pay the same amount less in interest regardless.
Post: Pay which houses down first?
- Investor
- Collinsville, IL
- Posts 5
- Votes 0
Originally posted by @Charlie Fitzgerald:
The higher the balance the higher the cost to carry at a given interest rate equal to a lower balance at the same rate. Setting aside any need for the "psychological effect", you will pay less overall interest tackling the larger debt first.
I don't agree with this statement.
It doesn't matter how many loans you have at whatever given balance. The total is still the total. If you have 10 loans at 15k, or 1 loan at 150k, the cost of carry for that 150k of debt will be the same.
I fall into the camp of highest interest rate first. Looking long term, this should have the greatest impact on your net worth.
Post: One -CF Rental, want to expand, thoughts..
- Investor
- Collinsville, IL
- Posts 5
- Votes 0
Originally posted by @Jacob Sampson:
If you were unable to sell the home for the price you wanted you likely don't have 50% equity. That being said here are my random thoughts. Keep in mind I'm not making any assumptions about property appreciation.
Currently you have 25%-50% of the value of your property invested in the property. Equity = your cash invested in the property. That cash invested is losing you money. I can't say how much but it sounds like a decent amount, long term probably several $100/month. In that scenario I would talk to a realtor and find out what price gets this property sold. If you can take the remaining cash and invest in a property that cash flows even $50/month (though, you don't actually want that deal) then you are hundreds of dollars a month ahead. You are, literally, better off having nothing than this property, outside of the education it is giving you.
I always recommend sticking within the bounds of your bank roll. Play the game for which you are prepared. unload this property, and find another small investment with which to continue your education.
Learn to execute exceptionally when small and then you will be prepared to move up.
Yes, this definitely gives me something to think about. I was evaluating it as the money I put into purchase and rehab is really gone, since I lived in the place so long, and there was no NOT spending that money.
Here are some rough numbers:
Purchase price was $85k back in 2001. It was an old house and needed a ton of repair. I put about $25k into it. I couldn't give it away for $85k, so rented it out. I owe $54k on it now.
It rents for $850/month, -10% for management or $85, payment is $792 (taxes and insurance $361, $299 principle, $132 interest). Now that I run the numbers I am only losing $27/month, not $50..
I suppose I was thinking that the money I am behind is gone, so there is no way to reinvest it. Also, my net worth benefits by about $270/month, no accounting for future CAPEX...
Post: One -CF Rental, want to expand, thoughts..
- Investor
- Collinsville, IL
- Posts 5
- Votes 0
Ok, here is the situation I am in right now:
I have one rental property, which was a home that I lived in for 10 years, and was subsequently unable to sell. I have nearly 50% equity in the property, and 10 years until payoff, but am cash flowing negative about $50/month (without expenses). It has been rented for 1 year.
I want to begin to add properties to diversify my income. I have good income, good credit, and some cash in the bank, but am also leveraged pretty hard on my current home.
So, my thoughts about moving forward look something like this:
Try to find a smoking deal which I could purchase and rehab with my savings, get it performing, then borrow money against it to replenish my savings.
I don't have any private investors right now, and I suppose that I feel like attracting one, or even getting a portfolio lender, may prove difficult because of my negative cash flow and leverage situation..
I guess my question is, if you were in a similar situation, what would think your way forward looked like?
Thanks!