All Forum Posts by: Christopher Telles
Christopher Telles has started 0 posts and replied 5 times.
Post: First deal anxiety (its a 100 year old fourplex)
- Investor
- Posts 5
- Votes 1
I'm not reviewing the financials. However, I wanted to comment about the property age and description. I bought my 1st commercial deal when I was 30 years old and it was a 1914 built brick industrial building. It had earthquake damage, was involved in the tenant/landlord lawsuit, and needed new truck doors, sewer work and some misc other improvements. At 55,000 square feet my buy was scary, but it turned out the be one of my best buys.
If you do your due diligence, check your inspectors inspection if you question anything (did the roof and plumbing work come with a warranty?) by paying a plumber or roofer or general contractor (structural issues) to go look at it way before the expiration date of your due diligence period.
If all that checks out, and you're good with the financial underwriting then don't be afraid to pull the trigger. Many folks who are not investors do not understand why people buy property, will never understand why people own and rent property, and will likely never buy a rental property themselves. This isn't a knock on your parents, they likely weren't around people who invested in real estate and thus its a foreign subject.
Wishing you a clean closing and perpetual occupancy!
Post: Agent Disclosure - when is it necessary?
- Investor
- Posts 5
- Votes 1
Yes, its always a requirement of licenses real estate agents and or brokers. No harm in tacking on a statement you're acting strictly as a principal in the contemplated transaction.
Post: Wholesaling and Analyzation resources
- Investor
- Posts 5
- Votes 1
Quote from @Kuba F.:
Hey @Sam Horton, thanks for including REI/kit real estate wholesaling software in your reply!
@Jordan R. Turnerwelcome to BiggerPockets - you'll learn from the best here! You might also find the resources in our wholesaling houses blog, like our top wholesaling podcasts post, informative. Reach out direct if you have any questions about the software. Cheers!
Is there a link to a description of the software's capabilities?
Post: Paying down additional principal each month
- Investor
- Posts 5
- Votes 1
Quote from @Joe Villeneuve:
Quote from @Christopher Telles:
Quote from @Joe Villeneuve:
Paying more on the mortgage every month isn't building equity...it's buying it. Paying that extra each month isn't negating negative CF...it's just paying it upfront. If you are at a breakeven after moving out, like this is, then you are really at negative CF waiting to happen. You aren't the one paying the interest, your tenant is since the source of funds is the rent. If you make cash added payments out of pocket, like you're suggesting, that comes out of your pocket and actually is an added cost to you since that principle you are paying for was part of the mortgage payment, which again was being paid for by the tenant's rent.
I would sell, take your equity/profit, and put it into a different deal with positive CF. This is a losing property for you.
As an individual renting a former home I tend to disagree that Billy should sell. I agree the prepayment of principal is not in his best interest and should be discontinued. However, as an individual, we're not talking about an operator here, his best long term option is to seriously consider keeping this neutral cashflow property with a fixed mortgage cost at 2.75%. Presumably, rents will continue to rise as the housing crisis in every major metro continues and as they rise his cashflow will shift to positive soon. Her tenant(s) will continue to pay his mortgage which will amortize and add equity to his asset which really comes at no cost to him.
We don't have the full story and maybe there is more to it but based on what information is provided I would say his best option is to keep the property providing he can weather some maintenance and vacancy costs in the first year or two until rent increases kick in and make up for any temporary cashflow shortfalls.
If rents continue to rise, and most likely so will expenses, the difference between the two (the added CF) will be so small it isn't worth the wait. Rents don't increase enough per month make a big enough impact here. The may gradually do so, but over such a long period of time it's not worth the wait.
The primary role of CF is to recover costs. Costs to the REI is all the cash they put into the deal...throughout the length of the deal. This incudes DP, added monthly pmts towards principle, negative CF, rehab costs, etc...This deal may never get all of its cost back if it waits for the CF to catch up.
Meanwhile, the losses are stacking up from the stagnant money in the equity which is gaining on only a one to one relationship with appreciation. That one to one relationship would exist with every property in an appreciating area. Where the big loss occurs is when you compare this loss to the loss of value when you could take this same equity, if sold, and use it as a 20% down payment...which would means it would be buying 5 times its cost.
Why would you want to weather a storm wearing a raincoat with no hood and holes in it?
Post: Paying down additional principal each month
- Investor
- Posts 5
- Votes 1
Quote from @Joe Villeneuve:
Paying more on the mortgage every month isn't building equity...it's buying it. Paying that extra each month isn't negating negative CF...it's just paying it upfront. If you are at a breakeven after moving out, like this is, then you are really at negative CF waiting to happen. You aren't the one paying the interest, your tenant is since the source of funds is the rent. If you make cash added payments out of pocket, like you're suggesting, that comes out of your pocket and actually is an added cost to you since that principle you are paying for was part of the mortgage payment, which again was being paid for by the tenant's rent.
I would sell, take your equity/profit, and put it into a different deal with positive CF. This is a losing property for you.
As an individual renting a former home I tend to disagree that Billy should sell. I agree the prepayment of principal is not in his best interest and should be discontinued. However, as an individual, we're not talking about an operator here, his best long term option is to seriously consider keeping this neutral cashflow property with a fixed mortgage cost at 2.75%. Presumably, rents will continue to rise as the housing crisis in every major metro continues and as they rise his cashflow will shift to positive soon. Her tenant(s) will continue to pay his mortgage which will amortize and add equity to his asset which really comes at no cost to him.
We don't have the full story and maybe there is more to it but based on what information is provided I would say his best option is to keep the property providing he can weather some maintenance and vacancy costs in the first year or two until rent increases kick in and make up for any temporary cashflow shortfalls.