All Forum Posts by: Daniel Walker

@Chris Masons thanks for the insight. I am amazed by the quantity and quality of feedback I've received on this question.

Thanks for the advice @Jennifer Slaughter The search continues!

Hi @Jay Baker, thanks for the calculator link. I'll check it out tonight.

> his works in high appreciating markets.. does not work in most of the cash flow markets that don't appreciate

@Jay Hinrichs this was the rationale behind me even looking at the property at the start of this thread. Others have characterized this as "rolling the dice" or "like buying a lottery ticket". I can see that a good general principle is to favor investments that don't rely on appreciation. But I can also see that under certain circumstances, it can work.

@Steve Shafer yeah this input is amazing! And this is from a relatively "stupid" question ...perhaps that's why there are so many comments - the answer is easy ;-)

At a local meetup group the last week we had a conversation about Greeley and the sentiment matched what you've said above. My wife is actually considering applying for a position with the NRCS there in the future (we live in Fort Collins but she commutes to Brighton) so that further increases my interest in the area (not to live, just to invest). Loveland is also of interest but probably not too dissimilar to Fort Collins. If I see something that really seems worthwhile I'd love to take you up on your offer to take a look at the numbers.

Daniel

This is literally the first time I've ever "run the numbers" like this. I'm learning what to look for and how to evaluate properties. The feedback I'm getting from everyone here is way above the number of responses I expected to get. My question should really have ben more succinct: should I consider gained equity as part of the ROI when evaluating a property? The answer seems to be an emphatic "no"! Thanks for commenting!

@Logan McConnell yeah we were very lucky buying our first house in 2011, then the second in 2014. Now my challenge is finding a deal. However I am really enjoying the prospect. Networking, meeting new people, evaluating opportunities. What's not to like!

Are you considering looking further afield than Fort Collins at all?

@Logan McConnell, yes we currently own a 3br pet friendly SFH in Brown Farm (w. Drake) which brings in $1600/m and we were lucky enough to have bought in 2011 so it cash flows nicely.

The thinking behind looking at townhomes was to reduce the maintenance costs, however finding something where the numbers make sense is proving to be very difficult. Perhaps this is a signal to expand the search to include SFH again. I know what you mean about the dog crazy nature of this town. It's one of the many reasons I love it!

@Joe Villeneuve

> You have just fallen victim to the Investor's Most expensive word..."rationalization".

This is it in a nutshell! I'm looking forward to sharing some of this feedback with my current agent.

@Joe Villeneuve thank you for this excellent post! This is just the sort of fire I was hoping to see my feet held to.

Though we have sufficient W2 income to cover the negative cashflow I recognize your point about the opportunity cost of having these funds sunk into this.

Also, the lack of ability to refinance (since it would return to or exacerbate a negative equity) is obvious but had not occurred to me. The "exit" is something I'll be more mindful of when looking around.

The $800 is a made-up figure to allow me to ask this question. It's based on a mortgage calculator principal and interest value. I recognize (and knew at the time of posting) that this does not represent the true picture of equity. Again, to get valuable responses like yours I think it was worthwhile throwing the numbers out there.

> All you are doing is putting money under a mattress in the rental house.

This is a great way of describing what would be happening. 

> That "equity" represents your cash...not profit, so you can't count it.

Also I had not though of it this way.

> What are your plans for your next property? How are you going to pay for it?

At this exploratory stage, it was a handwavy "I'll save up the money". We do have quite a bit of spare income. However I am beginning to explore how I can grow my investment without (fully) relying on our W2 salary to fund it.

Thank you for taking the time to articulate these thoughts!

Daniel