All Forum Posts by: Alexander Cabrera

I forgot to add another 0 at the end of our month gross earnings: $15500-$19500.

And because this is a cashout, the lowest 30 yr rate I can actually get is 4.25% with a loan amount of about $317k, thus $1560. If I were to have the flexibility pay off this loan to a 15 yr scenario, it would cost about $175 per month more in PI. How to measure the pro/con of a guaranteed annual return of 4.25% (because interest is not deductible more like 4.25/(1-.33) = 6.34% return, as well as having  $2100 to invest -as opposed to having $6660 per year to either invest -or to pay off the 30yr ( 18yr pay off at $555 additional). I question getting 6-7% after tax returns in the stock market right now.

The only problem I see with this, is I can't say for certain we'll stay in the home for 15 yrs. Maybe 3? Maybe 15!

Hello.

I've got a primary home 30yr loan at 3.95% of which $253k is left. $1272 PI, plus a 15yr HEL at $57k. $511 PI. Home is worth $420k so plenty of equity to refinance if we choose to.

I have the opportunity for a promo interest rate at 2.99% for 15yr plus with 1% org. fee. Total closing costs including prepaids/etc are heavy at $10+K and when built into the loan, I am given a scenario of $321k at 2.99 with a PI of $2215. I see the large interest savings of paying this loan off in 15yrs as apposed to the remaining interest if my HEL and primary are paid in 15 and 30yrs, respectively. And we often paid an extra $500 for the HEL so in effect we are doing the same thing of paying roughly $2300 a month but chipping away a lot less.

This primary home could be kept as a rental, should we move into a larger home for our increasing family. Maybe that happens in 2-5yrs. Or we sell. I know it pays to stay with 30yrs re/rental strategies and leverage...etc. However in Oregon we are federally capped on interest rate deductions along with state and local taxes so it's mostly a standard deduction for us, hence the higher interest 30yr doesn't help compared to 15yr from a fed tax standpoint.  Our debt to income ratio is low with about $3400 in mortgages (above plus a duplex 30yr at $1175 PI and a Car loan at $400) where gross monthly W2 income is $1550-1950 (depends on Profit sharing as part of my total compensation). Even adding other minor monthly 'debt' like cell phone bill, utilities, etc, it doesn't move the needle much.

Most scenarios that tout 30yr over 15yr use a very similar interest rate in comparison, however we're talking almost a complete point difference.  And those that talk about putting the extra $$ from a lower 30yr mortgage into the stock market for 'great gains', makes we wonder as we are likely going to hit a period (short? long?) of volatile and mediocre stock returns -yes speculation....

Finally I doubt we will go past a max of 2 USA rental properties and one primary home. 

Anyone have some advice? Can crunch some numbers on real savings differences/opportunity cost loss?

Thanks!

Hello,

I have been looking for my first multi unit (duplex) in the Willamette Valley wine country area of Oregon ( it will become Sonoma in 20 years ;-) ) and my retired father (healthy and active 66 years old) has been mildly interested in selling his home (no mortgage) for a change of scenery and possibly to move closer to our growing family. (We live in the same area I'm searching in) So I though why not be the owner occupier financially fronted mostly by me. Questions I have is if it makes sense from an ROI standpoint, as my several pro forma calculators don't really factor in these 'family' variables with what my Dad is proposing:

Here's the scenario: 

Purchase duplex of $350k - $400k. Both of us on loan, we get owner occupied interest rates and flexible down payment amount (although I feel I would want to put down 20% to remove PMI)

Once Dad sells his home (easier to do than finding a duplex) he will give me about $55-65k of the profits, be the owner occupier in a duplex, go halfsies on repair/cap ex, but only wants to pay about $500 per month (he'll adjust for inflation!) for the foreseeable future ( likely 10 years until he decides to move back to Peru (we're Peruvian) where most of our family is from and care-giving/maid will be a lot cheaper. I will also take the investment and occupier tax benefits as his low and fixed income won't need much tax breaks.

Finding the right duplex that makes sense from both and ROI and location sense (not on "multifamily row" for example) will be challenging but I'm trying to see if this makes sense for me financially.

Assume a good quality $375k 2bd/1or2bth duplex 4.75% rate, 20% down, $5k closing costs (assume $60k of needed $80 will come from father technically), no initial repairs needed. Prop taxes of ~$4000. In this area (McMinnville, Newberg, Sherwood, Dayton, Forest Grove...etc) a good 2bd, 1or2bth with ~1000 sq ft seems to garner about $1000-1500 for rent. Assume $1200 for below.

Assuming I rent out only one unit (assume already rented) and the other unit is 'family rented' for $500, this gives me a loss of about $250/month, and not including repairs or vacancy loss (doubtful in this area even with 2 units available).  About a $3000 loss each year. So if the window is 10 years, I'm out $30k. Yet I only use $20k of my own cash to technically own this property. And I have to assume rental rates for other unit will appreciate higher than inflation, plus my Dad's slight increase in his rent to me 'maybe'...

I see this as a net gain for me as even taking a ~$3k loss (yes this doesn't include over costs associated with managing a rental) each year for say 10 years, I save $60k of an original downpayment and can push it all into as tax advantaged vanguard fund gaining hopefully more than my loss on a year over year basis. And while I don't fully understand the ownership/rental expense tax benefits, I assume this has to help too no? Finally I get the non-quantifiable ability to have a family member close by to babysit. And whether year 10 or 15 or 5, one out, I rent out both units for market rates, staying above the red likely in double digit % returns. Goal is long term hold.

Can I get some experienced opinions out there? What am I missing? Keep family out and focus on pure ROI for an investment property only duplex? Pay higher interest rate, 25% down, but get cash on cash starting month 1?

Thanks!!