All Forum Posts by: Alexandre Marques dos Santos

@Mike Crouse

The more i read your posts the more i believe your situation is similar to mine.

Being specific, in your situation, considering you want to leverage a bit your portfolio, i would NOT start leveraging the houses you buy as investment.

You can refinance your own house.

The good thing is that being your primary residence, interest will be lower than interest in an investment property.

Remember, money cant be stamped. You refi your house and buy cash a new property. Gets proceeds and pay your home mortgage.

Buying cash, you will face less closing costs, and might give you an edge in negotiation ( maybe even better price, although nowadays seems to be hard to find good deals)...

@Waylan Liu

Its all about objectives. A higher return means higher risk.

If you want to grow portfolio, and can face a higher risk, you could refinance your house and get proceeds to invest in another one. Your return will grow as well your risk. The other house will demand mortgage payments and might face vacancy. If something happens, you will have to pay mortgage and your cash flow will be challenged. Can you afford it? Will you sleep well?

If you can afford the risk, Go for it!

Leverage will give you power to quickly build your empire.

If you are more conservative ( i am conservative, for example), you can leverage cautiously. Just remember that every loan comes to a cost. So instead of getting 100 k from 2 houses is better get 200 k from one house. Better to go 90% LTV in one house than 45% LTV in 2 ( example considering same value).

100% equity means you can have house empty and not have to deal with mortgage payments.

I have some houses fully paid giving 5% return. My money was in the bank receiving 1%... so why pay 4/5k to get a loan and pay 4% in interest? No reason to me... i considered the 5% as diversification, and i looked also for some capital gain... so yes, 6% can be good, 7% awesome... but you need to analyze each case individually...

@Javier Rosales

“ less consumers is what is driving inflation up..”. Can you explain the relation of lower demand and higher inflation? I missed that in my economics class...

Someone also posted strictly standards in loans... well having heard of 5% DP does not sounds strict.

Finally rates will probably be low ( 0-2%) for the next 10+ years. But my concern is with income, rather than interest rates...

@Moises R Cosme

I am still very worried. In fact i wanna see what will happen in March/April 2021.

Reasons:

1) median of household dropped significantly in 2020.

2) unemployment grew. Government distributed tons of usd. Firstly sending checks for householders, this is over. Then unemployment benefits, this process is finishing. Now some people lost their income. Then through reduction of interest rates ( refinancing added a lot of money to economy)- this will fade.

3) government imposed a measure to avoid foreclosures and evictions. When this is over, we might see it growing and the reality. Foreclosure/ eviction processes might resume and then landlords will face reality that income is actually lower.

I am not in a hope to see this to happen. But like any patient in a hospital full of medicines, we could be seeing a situation that doesnt reflect a stability and get worse quickly.

I am taking the opportunity to reduce my portfolio, selling some properties and growing my cash. If i am right, i will be in a good position to buy some cheap properties, If i am wrong, i was about to make the relocation in my portfolio.

@Forrest Faulconer

I understand the concept of the house not being an Asset. It brings more expenses and no revenue.

But i look it differently. I considere my house as an asset. I “pay” a synthetic rent ( the one i would have to pay to have a similar house, assuring i can live for a long period ( landlord happy, so no harassment of moving every 1 or 2 years plus taxes, maintenance minus the money working.

If theres a huge difference, then my house is a liability. If the equation is relatively balanced, i am living in an asset.

Theres an intrinsic value for living in your house. And that needs to be taken in consideration.

@Steve K.

That was a perfect statement. Thank you! I thought i was out of my mind

I would add that if i want to rent, looking at a house that has solar panel, against another that doesnt, i would pay a better rent as my electrical bill would be more civilized ( or zero). Obviously the difference in rental is a function of the average monthly electrical bill.

In his case, considering its true that average electrical bill is 400/mo, i would expect rent to be at least 200/ mo more if solar covers entirely the bill (50%- pure guess)

One think he should be careful is to write the contract specifying what happens with the netting in the energy. If theres excess of production over usage who gets the check. For his cash flow he should make it clear he gets it.

Anyway, good luck. Let us know what did you decide and give us the numbers!!

@Devin Monroe

Some things to consider:

1) the price of the property might have moved up while rentals did not. That is squeezing you return. I would imagine the rentals might catch up with time, but thats not a sure thing

2) if a PM is charging 10% of the rental, they shall not charge a full month to rent a unit. That would give you some extra cash to your cash flow

3) With cash flow of 190/mo, i see a 7.8% CoC with 29 k investment. Not great, but if you find a better deal with PM ( like the rental) then you might get closer to your 10%.

@Matthew Irish-Jones

Sorry mixed posts...lol. Will make same rational on here...

I still mentioned 50-50 from profits. Not from the capital. The equity needs to be treated differently. If there will be a rehab it changes...

If you buy and rehab a property, lets say you can make as much as 30% profits.

After buying you have 130 of a 100. If you put zero and he puts 100, then splitting profit, you have 115 for him and 15 for his son. Then 15% of the equity is fair

If the son put 10% and dad 90%, then you have 25/130 and 105/130, which is closer to 20% equity.

Again, 50-50 from profits is not from equity!

@Matthew Irish-Jones

Doent seem you understand my proposal. I never advise to have 50-50 equity.

In fact if you read my post i ended up with 20-80.

I saw some posts mentioning 50-50, but i think this proposal to be obscene. Who will give that equity after putting 90% of the cash?

50-50 on profits i think its fair. This is because he wont get commission, he will do most of the work, and he will enter with 10%.

Good luck

@Christian Walker

When you say 50/50is from profit? If so its super fair.

What u need to explain is how things works. A property manager charges 10% of rental. Considering tax, maintenance, mortgage, this can be as much as 50% or more!

And another important, u bring knowledge and he can trust you. And you get paid only if theres profit!