All Forum Posts by: Trevor J Dammon

Thanks @Marcus Auerbach, I really appreciate the advice!

@Marcus Auerbach, I totally agree. I've been wondering for some time why cash flow is talked about so much. From my point of view all that matters is that my investment out performs the stock market over a given period of time. So I think something like IRR is a far better metric (although I don't see anyone using this for smaller 2 to 4 unit buildings.

I do think it is possible to cash flow with 0 down on a tri- or quad-plex. Where I am in the Minneapolis area I think it would be tough to do on a duplex. I don't think moving is really an option for me but out-of-state investing is an option for me down the road.

@Brandon Rush, I appreciate the book recommendation! I'll definitely check that one out. I'm planning to research the BRRRR strategy a bit more as I think it's more inline with my goals. I don't have much experience with searching for properties beyond using the MLS so I still struggle to know what is beneath market value.

@Marcus Auerbach, thanks for the reply. I have access to doctor loans which can be as low as 0% down, so I do have the ability to acquire properties somewhat quickly. However most of the sources I've listened to say it is a bad idea to use these loans for real estate since it will be difficult to cash flow with 0% down. I'd like to take a more aggressive strategy than what I stated in my initial post but I also don't want to have negative cash flow.

Hi all,

Newbie here. Creating a written plan with some spreadsheets. The basic plan is to buy a duplex with 20% down (100k down for a 500k property). Annual cash flow around $2,500. After the property has appreciated and I've paid enough of my loan down I will refinance and cash out enough money for a 20% down payment on another property. Seems like it takes about 7 years for this with a 5.5% interest 30 year mortgage.

I'm not sure if this is even a good strategy but I am just learning.

Is it fair to assume 2% appreciation?  I know that is the average but over 7 years its much harder to predict. Is there a better way to estimate when I can refinance?

Thanks @Zach Taylor,

That clears things up a lot. So I need to track property value and loan amount when determining the right time to refinance. When I do refinance is the new loan usually a shorter term or will it also reset to a 30 year loan?

Hi all,

Newbie here, trying to understand the math behind refinancing.

When I refinance a property to fund a new property purchase should I count the debt against the original property or the new property?

The question is a bit confusing so here is an example:

I put $50,000 down on a $530,000 property. I have a $480,000 loan at 5.5%. I make monthly payments of $2,725 and the property has exactly $0 cashflow.

I assume the property value appreciates 2% annually.

After 4 years, due to appreciation, the property is worth $573,700. So I have gained equity of $43,000.

Also, following my amortization schedule, I have paid off $27,000 in principle. 

This brings my equity to $120,000 ($50k down + $43k appreciation + $27k paid on principle). 

Now I use that equity to refinance and the bank gives me an additional $100,000, which I will use as a down payment (20%) for a $500,000 property.

I'm trying to put all this data into a spreadsheet, but after the refinance I am not sure how much equity (not even sure if it matters) I have in each property.

Scenario A: I count the new loan as debt on my original property. So my equity would drop to $20,000 and my loan amount would be $552,000 ($452k the remaining loan balance + the new loan $100k). And my equity in the new property would be $100,000 with a $400,000 loan.

Scenario B: I retain my $120,000 equity and just add $100,000 on to the first properties debt amount, bringing it to $552,000. While my new property I have $0 equity and a $400,000 loan.

Hi @Theresa Harris,

My goal is to map out and estimate all expenses as best as possible. I think finding taxes and insurance is easy to do. Any advice for estimating repairs and capEx? I realize that is highly dependent on the age and state of the house, but I would still like a way to estimate these costs before diving in.

Hi @Nathan Gesner,

I meant to say rent is around $2,000 per side. So the annual rents would be around $48,000 excluding vacancy. What specifically do you do to get detailed info a property. Currently I just look at the facts and figures on Zillow. Would the agent have all of the info about how old different systems are and whatnot? 

Hi all,

I've been doing a lot of research recently and am now starting to look at actual rentals and run some numbers. I'd like my first property to cash flow positive. I find estimates for property taxes by looking up the buildings history. I can also get a decent estimate for insurance. The part I struggle to estimate is repairs, maintenance, and capEx. Is there a good way to estimate these costs or is better to just bundle all non-mortgage costs and use the 50% rule?

The properties I am looking at are mainly duplexes in a nice are (around the lakes) in Minneapolis. The prices around around $500,000 and rents around $2,000. 

Thank you @David M.

It makes a lot of sense. I do love math. So I don't mid tinkering with equations/spreadsheets. Any advice on how I can learn to actually make these estimates?  I have 2% as annual appreciation, but how can I accurately estimate things like maintenance and capEx for 5-10 years?

Again thank you for the thorough response. Much appreciated. 

Thanks all. I'll continue to do research on the topic.