All Forum Posts by: Account Closed

On the face of it it does not look like a good deal at all. Even if it was not a townhome the rent ratio is less than 1%. Secondly, you get hit by HOA fees. The HOA fees can be considered a kind of insurance against major structural repairs but on a new home, thats unlikely anyways. So its just another cost. I dont see how you could get to any reasonable cash flow. Plus the HOA fees can go up, speciall assessments can happen and townhomes dont generally appreciate as much as SFRs. Then you may have neighbors complain about your tenants etc. I wouldnt do it. Charlotte seems to be a good market for SFR with far better returns. Why not look at those?

There is no way you would get 30 days per month occupancy on a vacation rental. Lucky if you get even half of that. And then you have variable rates, weekdays you will not get close to $225 either. I have rented condos in Maui and paid less than that for a 2 bedroom unit. On top of that you would be paying a property manager, cleaning fees etc etc. There is no way to make it cash flow neutral, let alone positive.

Can you qualify for both mortgages? The equity is not very high and you may lose some of it in the transaction costs anyways. If there is appreciation potential and the rent would cover your costs, you may as well keep it.

Depends on what neighborhoods your home is in and what are the typical tenants. In a working class neighborhood it would be difficult for many people to have 2 months rent to put down on a deposit. Realistically if you have a $50K house and charge 800/month in rent, 2 months rent is 3.2%. For 3.5% down they could get a FHA loan and buy the place and pay less than half in mortgage! There is a reason they are renters in the first place!

Some sellers say "appraised value" to refer to tax appraised value. This is a double whammy. Actual value much lower and high property taxes to boot!

George P.

What I mean is if the property tax is 2% of price and your rent ratio is 1% then the property taxes will eat up 2 months rent. Which looks like your numbers approximately.

These stories make the money I pay my property manager more than worth it!

In Indiana? The property tax is capped at 2% of the assessed value. So either your assessed value is too high or your rents are too low! At the 2% rule it should take one months rent. At 1% it should take 2 months rent. 4-5 months is way too high.

David Janash

I have also looked into Private Lending and this is what I understand. You can earn a good rate of interest in excess of 12%. The typical way seems to be going through a broker. The borrower pays points (typically 3-6 points) but the brokers keep a good chunk of this. You get a deed of trust. You should only take a first deed of trust. The broker is supposed to verify the title etc. Then if all goes well, borrower pays back on time and you get interest and principal returned. Rinse and Repeat.

However, if the borrower does not pay back, the property is not automatically yours. You have to foreclose, just like a Bank. This takes time and money that eats into your return (and causes stress). Theoretically if you have lent only 65 to 70% of the value, you still come out whole. The issue is how do you really assess the value of the asset? Unless you understand the market very well and construction costs etc on a rehab process, how do you assess the risk? In other words you are attempting to do what banks have whole departments of underwriters for. I dont think I am that good.

Another option though is to invest in a fund that does Private Lending. I have recently invested in such a private placement fund. You have to do your diligence on the fund but once thats done, the investment is fully passive. In return the fund manager takes a management fee (typically 2%) but thats less than what most brokers take to bring you deals.

Long term MLS listings in a hot market like Phoenix are suspicious. More likely the price is too high and seller is not motivated. What do the comps in the neighborhood say? Is the neighborhood in decline? Any upcoming zoning changes? Big hidden repairs? Could be a lot of reasons.

If the home is fairly priced, confirm the rents. I would not accept 1% on a low priced property. You can get 1% on higher end newer homes that will hold value better and have lower maintenance costs. I would assume the $80K home is older.

You could make an offer, go do the due diligence and find out. Just have the contingencies that allow you to back out.