All Forum Posts by: Cynthia Dufresne

So some backstory about our current rental and the source of the private funding is in order!

We bought what was going to be our primary residence (has a pool, etc.) for a great deal in 11/2021, then was asked to help with our mom's property after her tenants moved out. We are sitting at about 60% LTV on it and it cash flows very slightly with the current rent, reserves, etc. but it has that pool, which is not ideal on the expense side. The tax exclusion possibility goes away in 11/2026, and I think rents are going to soften (they have recently, but we locked in a 2-year lease at what may turn out to be the peak).

Our neighborhood is desirable due to somewhat of a location hack (we are 1 minute away from Swimming Pen Creek then on Fleming Island for you locals), so we expect to be able to sell in 2 years and cap a 200k payday tax free. Should still have about $175k in capital on hand after adding what we will personally save from our budget during this time frame also. 

Our "lenders" are family who will lend to us a 25% down payment on the first property we buy at a rate comparable to a high interest savings account, so 4-5%. Not a high cost of debt/capital at all, so we are not concerned about the balloon payment.

Regarding long term goals, we plan on building slow and steady over the next 10 years, but then have them all paid off within about 20 years for retirement income from the rentals. Our job is not physically demanding at all, so we should be able to continue to work for a long time (unless AI takes our jobs away!!). That last piece is why we are moving to real estate investing to replace our income... :)

We are targeting sub 300k properties that are in the path of progress around here. We will buy any type (turn-key, rehab, etc.) so long as the numbers work. Being appraisers, we are familiar with estimating "cost to cure" of deficiencies, and we know useful life of short lived items so we can build seller credits into our offers that will help mitigate monthly costs to us for reserves.

We are going to take it slow and steady, as I said, with an eye on returns that may not be spectacular but still rival the stock market in a sector of the economy we know well.

Thanks for the encouragement @Dave Meyer!!

Good morning, all!

We are both residential appraisers working the NE Florida markets looking to transition over the LONG term to replacing our modest annual income through small/mighty single-family by buying in the path of progress where prices appear to be somewhat undervalued relative to long-term upside potential. In addition, the deals will be based on long-term rental outlook, but we are going to see how a mid-term rental strategy pans out for the higher cash flow in the short term.

Our current housing situation is that we are house hacking by house-sitting for our snowbird mom (so we basically have no housing payments), and we are looking to stay that way until we have to move (5-10 years?).

I am using Dave Meyer's 10% Target spreadsheet to analyze our first deal(s), and I love it. HOWEVER, my question is: given our goals/strategy, when analyzing returns for potential deals on the single-family rentals, along with a relatively low cash-on-cash return of roughly 1-2% should we allow ourselves to consider/count on 1) modest appreciation growth of only 3% year over year, 2) expense increases mirroring the current CPI of 3.5% and 3) low rental upside of only 1% (or even 0% given current market conditions).

For example, if a deal gives a TOTAL return of roughly 15% year over year for 10 years but only starts out at about 1% cash flow via long-term rents, is this a good idea? This would be done by leveraging private funding for down payments that will be payment free for two years but then paid out with a balloon payment plus interest on the back end via a tax excluded sale of our current rental property in two years, giving us a very large payment of tax-free income.

Thoughts? Too much cash outlay? Acceptable, lower risk strategy?

Thank you!