All Forum Posts by: Alexandre Marques dos Santos

@Scott Benton

Thank you for your post. Even my acc manager thought i was an alien when i tried to discuss this option.

One point i would like to clarify. After recasting a portion of the interest paid should drop as you have paid off part of the principal. So the economy should also work there too.

Recasting ( i never knew how the process was called) is to reduce the principal of debt keeping the original maturity of the loan, therefore recalculating the payments to match that. The original interest rate in the contract remains the same.

This option is the only one when you have interest low ( no much additional saving on refinancing) and refinancing would cost thousands of dollars that does not make sense ( economically speaking) to do that.

Great point.

@Scott Dongjin Lee

I will not critic your plan... seems solid. But as many pointed out, i would make few adjustments.

1) start with 1 property. The fact tou can pay 2 mortgages at once tells me ur financials are solid. But u lack experience. O e unit will give that experience while you are abroad. You will learn simple things while can study and learn other

2) i like the idea of saving as much as you can. I would, in your case, shorten the tenor of the mortgage, forcing you to save more. In 5 years you will have a nice equity to refinance and acquire a new unit and start boosting your portfolio.

3) acquiring 2 units might be easy to pay but might not be as much easier to get the second mortgage. That is because banks will consider income and expenses ratio, and expenses in the first house ( mortgage, insurance, taxes) will reduce a lot the ratio, triggering their limits. Or the rate might not be as good as you could have, so would not be the best investment.

Good luck on your journey.

@Jack B.

Not sure if i understood your question. But let me try from what i took it ...

You refi your house to buy a new one. Interest is an expense for your business ( please i am not a CPA, so talk to one to confirm), and you want to find, from the payments you do, how much is interest and how much is principal, to be able to deduct from your income.

I will start saying bank will send this info. If you want to find yourself, i would build a spreadsheet and use Excel to calculate.

What we know? PV, tenor, interest and installment is equal.

With all the info, you can get to find how much is interest and how much is amortization.

One extra info ( check with your CPA). I believe the expense you incur in refinancing should be deducted from your income ( i never did refinance, so uou need to double check this).

@Dane Silchenstedt

Another aspect to take into consideration, if you have a property under your name and move to a LLC, you might be pushed to pay HOA transfer fee. I opened my LLC and later transfer one property to that LLC. Cost me almost $1000 to transfer from my name to the LLC. They considered it was a normal transfer of ownership, even being my own LLC.

I dont regret opening. Yearly maintenance cost is very low. Problem is this ridiculous fee charged by some Associations.

@Jenna Walker

Selling has few steps you need to know, like survey, contracts, inspections timing and on. If you have a good RE lawyer you will be covered.

Put a sign FSBO depending on where the house is, can avoid some traffic from realtors. An idea is to put the sign and add " brokers welcome", meaning you give a commission if a broker brings you the final buyer. As the broker is acting as a buyer broker, you would give him 1/2 of the commission (2,5%)

@Jimmy Lieu

When you refi, you enter in a new contract. Using your numbers, you had a contract paying 6% interest and entered in a contract paying 4%. If the amount and tenor are the same the result will be a lower installment.

To tell you its worthy, though, you beed to take into consideration of the cost of the refi.

If the actual debt has a good amount outstanding for a reasonable tenor, i tend to believe its worthy, but hard to tell without knowing those factors ( including the cost of refi)

@Danny Keating

Probably will repeat what many have posted. But hopefully will reinforce the message so you really get it.

Real estate business is a game for patients. You dont build a portfólio quickly. You need to understand the market you are investing as well as the impacts in the economics of the region you desire to invest.

Its a business you can grow with others money ( leverage) and in the long term will pay you back... but the road is very bumpy... so you need to be cautious...

NEVER go for others opinion. NEVER! You are the only one to understand your risk limit and your ability to sleep well in adverse environment. Cash flow or not cash flow , leverage and how much, all those concepts should be learned but only you can apply to your situation. Talk, engage, network so you learn from others, but remember... you have to be the captain of your company...

Good luck

@Emanuel Ohunwu

I work with mike powell insurance

They been friendly. Not sure if the best, but very receptive to my enquiries

@Hobart King

Not the expert, but seems high. Do you actually have the right policy?

I have several properties in Texas, value from 220 k to 570k. The insurance varies from 550,00/year to 1200,00/year

Be sure your policy covers most of the needs as a LANDLORD.

Maybe u are on a flooding zone (i personally avoid flooding zones as they very expensive)

Good luck

@Gil Ganz

I dont know if theres ever a name for the strategy. But different from most of the guys ( make a 100% IRR seems a fantasy), i like the strategy.

Using your numbers, you will put 85k in a house and sell it for 100k. Take 20% down you receive 20k back, so you only put 65 k on that. Now you have a 65k for a loan performing 8% interest over 80k ( 10% seems top ) for a cash flow of 764.52 per month, will give you a 11.63 return per year!

Notice i used 8% interest and tenor 15 years.

Congrats, you found a great investment.