All Forum Posts by: Mark Hughes

Enough time to devote to it

@Melissa Treuman let me know if you have questions. I have small multi’s in ABQ and Colorado.

@Christine Montoya welcome and good luck to you!

@Michael Nathanson no real downside other than a little time to work w bank pre approval process again. I think it’s not too early. Better to have it ready in case. Plus let’s say you see a place you love in March and put an offer on a house mid-March you might be counter offering for a week or two and then settle on a closing date 6-8 weeks out from then to put you closer to your summer window.

@Travis M. There’s a loan option called ‘delayed financing’ that may be what you are looking for. You have to show that all funds to buy the property were paid in cash by you and typically this will not cover the renovation costs but you can get a loan turned around quickly with a new appraisal, etc.

@Michael Warinner why not do both?

@Laura Williams what is your combined principal gain per month or per year? You may be -$20k in cash flow but gaining back $15k in principal pay downs? So then your net gain would only be -$5k.

Have you figured out which property is the ‘worst’ on a monthly basis? And this isn’t just the cash flow, as you mentioned property 2 Shaw a 15 year note. To me it’s likely property 3.

Another key factor is have you lived in any of these for a combined 2 of the last 5 years so if you sold it you could do a primary residence exclusion on al capital gains if any.

I had a similar situation in Denver where a 3,400 square foot (previous) primary residence was losing slight monthly cash flow of a couple hundred bucks per month. There's a sweet spot that you can find in terms of max rent per square footage. A huge house will bring in slightly more rent than a big house but pound per pound the smallest house will often bring in the most rent per dollar in value. My strategy was to sell that as I had lots of equity in the house and use those funds to purchase multiple smaller property values in another city with lower cost of living. I also liked the idea of being invested in a lower cost of living market to diversify some risk. It's of course more properties to manage but something to consider. If you sold one of the properties that is losing $600/month and replaced that with two properties that gain $200/mo each then you go from losing $20k to only losing $8k/year in cash flow and now you have a total of 4 mortgages that are gaining principal each month so you might be close to breaking even in IRR each month/year.

@Adam Scheetz I did the same thing with a BRRRR last year. Bought a 4plex for $115k all-cash at auction and Reno was $60k. ARV 193K so 75 LTV would be 145k but I only took out $105K loan because I wanted it to cash flow strong. But I could have maxed it out and only kept 30k cash in the deal but I didn't feel comfortable w the cash flow. I'm glad I did because I ran into tons of red tape w zoning and permitting and that slowed me down an extra 3 months (on top of 3 month Reno plan). Now all 4 units are renting out roughly $625 ea so the cash flow is solid w mortgage payment of around $1k but you need to decide your own balance of how much to pull based on your goals.

If you are in total acquisition-mode then pull out more and use it to buy the next deal/s. But I've done lost of acquisition the last 3 years and just looking to add 1 property per year the next few years so I didn't want to get too much more in debt just to pad the CoC numbers.

@Michael Noto i just painted my last BRRRR a four plex in Navajo white as well thanks to the recommendation of my PM. Looks great.

@Dominik Perrenoud everything is a balance. In your position and most other in the first couple years your expenses will increase to a reasonable level. But the most important is if you able to increases income over the next 3 years and beyond try not to let that increase those expenses. Then you can have a savings over the following 15 plus to save aggressively. Or invest aggressively to achieve FI (financial independence) if that is attractive to you.