All Forum Posts by: Mark S.

@Will King, define “cash flowing $5,200+ a month.”

No, I don't think that but my calculations are meant to be fairly conservative. One of my PMs charges $200/year for lease renewal, which comes out of the vacancy loss allowance. They also have a 90-day guarantee that if my property goes vacant for 90 consecutive days, they pay me full market rent on day 91. I could probably use a much lower, maybe even half, vacancy loss allowance, but while I'm new to REI and still figuring out the long-term averages, I'd rather be safe than sorry. I plan to buy/hold for a long, long time. As rents increase (hopefully at a rate faster than expenses like insurance and property taxes), these numbers get better over time as the P&I payment stays fixed.

@Nathan Hui

I buy turnkey, fully rehabbed (new roof, new HVAC, new/updated plumbing and electrical, etc.) without any deferred maintenance in Memphis, TN at 1% rule or better.

I set aside 8% for vacancy, 5% for ongoing maintenance, 5% for eventual cap-ex which is 18% total.

I use conventional financing with 20% down, 30-year fixed rate mortgages. So, my formula is:

Rent - 8-10% PM fees - PITI - 18% reserves = cash flow.

I average about $160/month per unit. The range is about $120/mo to $200/mo depending on the property. So far, these are all SFRs. Hope this helps.

@Adrian Vega

Why are you having dinner with your tenants? That seems to definitely blurr some lines. I have never even met my tenants and they live 8 hours away. They don’t have my number and I don’t have theirs. My property management teams take care of that, and a lot more, and deposit to my business account. Yeah, it costs a bit more to have a PM, but a good one is worth their weight in gold. Best (deductible) money you’ll (read: your tenants) ever spend. I sleep like a baby.

of course it’s correct.  

@Ben F. @Curtis Chism

You absolutely CANNOT BORROW from an IRA. There are no loans on an IRA.

Other types of retirement plans, like 401(k), 403(b), etc., may allow for loans based on the plan document, but NOT an IRA.

@Lance La Croix, just curious, what makes you qualified to be a personal finance coach?  What do your clients typically look like?  

Thanks, @Randy Bloch.  How did you here about this?  I never got an email or anything from them (am an existing customer).  I just made a sizeable deposit last week and wish I knew about it then, but better late than never, I guess.   Thanks for the link. 

@Randy Bloch

Where are you seeing this bonus information? Just looked on their site and didn’t see anything. Is it a CD or just their hy savings? Minimums? Restrictions?

@Chauncy Gray

What you are not considering, at least in your initial question (I started reading all the responses and then finally jumped to the end), is the opportunity cost of prepaying the mortgage. As others have said, your tenant is effectively paying the interest for you. Who cares if the bank “doubles their money” in 30 years in terms of total interest paid relative to the amount borrowed? You should be able to double your own additional capital (by NOT prepaying the mortgage to reduce total interest paid) much more quickly than once every 30 years. People that talk about the amount of “interest saved” in prepaying mortgages often fail to mention the opportunity cost of NOT investing those funds elsewhere. Simple example, using round numbers: If you can earn 10%/year with an extra $1 by investing it, why would you “pre-pay” a mortgage at 5% interest? By NOT doing that, you are creating positive financial arbitrage (ie, a spread) of, in this example, 5%. The larger of a pool of assets you can do that on, the better off you will be financially. With that comes risk, but virtually nothing in life is guaranteed. Couple this with the fact that long term inflation makes it easier to pay off the loans and, as previously stated, that your TENANTS are effectively doing so (NOT you!), it’s pretty much a no brainer - especially in the earlier stages of your investing career. As you get older, have been investing for a while, and your risk tolerance changes, MAYBE it makes some sense to have some paid off properties (there are many on here that will make this argument, and it can be viewed as a valid one), but until then, when you’re in GROWTH MODE, I don’t think it makes sense to prepay the mortgages. Check out Keith Weinhold’s Get Rich Education podcast (I believe episode 6/7 - Why You’re Not Financially Free - or something to that effect). Also, The Value of Debt in Building Wealth is a great book on the concept, too. Goodluck.