All Forum Posts by: Sunny Karen

@Chris Seveney - Glad to hear about your experience and congratulations on the excellent plan. 

What sort of area did you target for the investment? high-appreciation or better cash-flow or a mixture of both.

We are planning with Tulsa/OKC which is more conservative with appreciation and reasonable on cash-flow. I don't expect appreciation to be like what it's been the last 10 years and trying to project that at 1.5% for appreciation and rent increase for our model.

@Mitch Nachtigall Thanks, we are trying to look at this as delayed gratification so that we reap the benefits down the line. We haven't accounted for very large unforeseen expenses, but our hope is that since we are buying new construction and estimating 10% maintenance & capex budget, we can save a lot of that upfront in the first few years which should cover larger expenses down the line. I suppose we will see how this plays out. This model does not account for rent decreases, though even with the current rent we should be net-neutral and the mortgage should be getting payed down. I believe that US government is good at printing money and long term inflation will continue to be above 2+% which should increase rents long term.

Hello BiggerPockets community,

I wanted to get some feedback on my strategy to fund my kids education using real-estate. My older one is ~14 years away from college and younger one is ~18 years away from college (if they decide to go).

I am targeting the Tulsa & OKC metro area. I have a few new construction duplexes I am evaluating.

Cost for 4 duplexes (8 doors): ~$1.32M

Gross rental yield today: ~130K/year

With 40% down-payment (I know it's high) and 6% interest for 15-year term, I will be breaking even on cashflow today or slightly negative (<$3000/year).

Assumptions: 10% vacancy, 10% maintenance + capex, 10% property management and PITI: 100K/year.

I am not worried about cash-flow at this time and can cover expenses with W2 job.

In 15-years, the hope is that the homes are full paid off and at that time we will have:

- 100K/year in net cash-flow assuming 1.5% rental increase/year. This should cover college expense per/year and the kids are spaced out by 4 years.

- 1.8M in equity assuming a 2% appreciation.

This requires us to put down ~$550K today to make it happen. The CoC return initially is non-existent, however it does result in ~40K/year in mortgage pay down. And if the rates decrease to <5%, we can always refinance and pay-down sooner with the generated cashflow.

Any one doing something similar for kids education and long-term wealth building? Any risks to consider?

@Chris Seveney - That's a good point. Given that our goal is stability with RE investments, we are leaning with paying cash.

@Bruce Woodruff - Good feedback, the workload and handling stress with RE investments is something we are not used to. Need to put processes in place even with property management. Are you referring to stress related to management (vacancy, turn-over, time commitment, ...)

@David M. - We plan to continue working for the next 10-15 years, so the income requirement is at that point in time. Having said that, my spouse and me work in high stress jobs and having some level of constant income coming from RE investments would be good psychologically if we want to take a break or lose our jobs. Our expenses today are about ~10K/month (with a large buffer) and when we relocate to Europe/Asia our expenses will come down to ~5K/month. Initially we plan to use the cash-flow to save up for more properties to purchase, which should increase the cash flow 10-15 years down the line, likely keeping up with inflation at least. I agree with not having a crystal ball, we are looking at current net cash-flow and not baking on appreciation or rent increase (which is likely to happen over the long-term). 

I haven't invested in notes before and don't have a process to vet those investments out. Thank you, will look into it.

How would you go about investing in real-estate if you were in our shoes?

We do have other investments in the market with our non-taxable assets (401K) which we plan to use post retirement age (60).

Hello BiggerPockets community,

I am a new Real Estate Investor and would love to get some feedback on our strategy.

Goal: Achieve sustainable income of net $10K/month, while the properties appreciate long term. I am a buy-and-hold investor and planning to hold long term (10+ years). 

Strategy: Buy SFR, multi-family (duplexes and 4-plex) OOS. Currently looking at Tulsa and OKC in Oklahoma. Plan to buy a combination of new construction and turnkey to avoid large capex expenses in the near term. We plan to have a property-manager and in 3+ years we will likely be living outside the US in Europe/Asia.

Financing: I have about $1.3M to deploy right now and will have additional ~$700K (sale of primary home) to deploy in 3 years (total $2M). 

Option 1: The more traditional approach with about 25 - 30% down can buy about $3-4M with leverage. With current interest rates around ~7% for investment properties the net cash flow initially with new construction or turnkey would be 1-2K/month (terrible CoC return). Hopefully when interest rates go down and rents go up in the next 2-10 years, we can refinance and have better cash-flow.

Option 2: Pay with cash right now (~1.3M) and with a ~7% cash-on-cash return we conservatively net ~7-8K/month and properties appreciate with inflation. After 3 years, deploying additional 700K cash should help us get over our 10K/month goal conservatively. This will also give us the option to refinance if the rates go down drastically. Our plan in the near term would be to use the cash-flow to buy additional properties every 1-2 years, increasing cash-flow so that we can live off that income after 10-15 years.

Given our modest goal of $10K/month, I am leaning towards Option 2 which is to use cash to buy properties and in a few years re-evaluate financing.

Here is one of the new construction duplex properties I am vetting right now:

Purchase price: $360K for a duplex.

Expected rents: $3300 monthly

Insurance + taxes: $500

Vacancy, Maintenance + Capex, Property Management (25%): $800

Net cashflow: ~2K/month (CoC ~7%)