All Forum Posts by: Account Closed

I was quoted $4/sqft to sand and refinish hardwood floors for a 1,500 sqft. property in Detroit. Is anyone paying that kind of money to refinish floors?

@Joe Villeneuve

@Joe Villeneuve

You’re right; it is a slow process. This is my first investment and only one strategy of many that I’ll use depending on the situation.

@Joe Villeneuve

Yes, the principal pay down is happening every month from making the mortgage payment, and the source of these funds are coming from the $2,800/month in rent I charge from the same property.

@Joe Villeneuve

Yes. Equity and principal pay down are the same thing. Sorry for the confusion.

I was just trying to show how paying down the principal is a gain or is a form of “income”, depending on how you look at it.

In other words, if I had an interest only loan, I wouldn’t be increasing my equity every time I made a payment.

@Joe Villeneuve

@Joe Villeneuve

You're right. Principal pay down doesn't count in regard to cash analysis. That's why I didn't count it when calculating my COC return. But technically speaking, principal pay down isn't an expense. You're just transferring an asset, which keeps your net worth stable.

The plan is to sell in 2yrs. The longer I hold onto it, the more money I'll make. I'm not exactly sure how you calculated 2k/month in positive cash flow, but I don't bank on appreciation. 320k is my ARV, anything on top of this is icing on the cake. Even if I only sell for 300k (which is unlikely unless housing market drops significantly) at the end of my two year mark, I'll net 20k minimum.

Math Calculations -

2020 Loan Amount: 260k

Principal PayDown Per Year: minimum of $5,220 X 2yrs = $10,440

Cash Flow Per Year: $8,316 X 2yrs = $16,632

Equity Pay Down + Cash Flow = $27,072

Sale Price: 320k

Commissions + Closing (7%) = $22,400

Updated Loan Balance: 250k

320,000 - 22,400 = $297,400 - 250,000 = $47,400 after sale

Total Cash Invested: $22,000

Total Cash Back: $74,472

Net Profits: 74,472 - 22,000 = $52,472 & this doesn’t include appreciation

If you want to account for hiccups or supposed repairs, take 10k off of profits. That’s 5k/yr, which is unlikely considering my renovations.

Ultimately and God willing, I'll make 200% on my money within 2yrs with a SFH. In this case, my home is definitely an asset. I do agree with Robert though. In most cases, people's home is not an asset simply because they don't account for everything that comes with homeownership. In addition, it's taking money out of their pocket every month.

I also don’t see where you are calculating negative cash flow for 4 months, do you mind explaining your viewpoint?

@Joe Villeneuve

Can you tell me what do you think about this deal, whether it’s an “asset” or “liability”? (I’m not being a smart***, just genuinely want to hear your thoughts)

Deal Type - SFH, house-hack/live-in flip, and rental.

Purchase price: 218k

Interest Rate: 3.15 or less

Rehab: 50k

ARV: 320k

Commissions on Sale + Closing Costs: 7%

Loan Amount 3% down (purchase price + rehab cost): 259k

Closing Costs: $13,960

Total Money Invested: $22,000

Taxes: $625/month

Insurance: $64/month

Interest Payment: $683/month

Principal Pay Down: $435/month

Utilities: $300/month

Total Expenses: $2,107/month

Monthly Income From Rent (house hacking): $2,800/month + $435/month (principal pay down)

Total Income: $3,235/month

Cash flow w/out principal: $693/month

Cash flow w/principal: $1,128/month

Cash on Cash Return: 37.8%

I plan on selling within 36month after living here; and God willing, will be able to utilize tax advantage of no capital gains tax.

Yea, I guess it depends on what our overall goal is. If we're just looking for passive income for a comfortable life, then it may not be that big of a deal. However I do believe that if we want to make real money, then making the right deal(s) matters.

@Griffin Parriott debt free

@Griffin Parriott no loans

I am 22 with 40k of my own money to play with. I have a SFH deal under contract that will cash flow $650+/month, and will net me an overall 30k-35k at the end of the deal. In order to net 30-35k, I must "live" in the property for at least 2 years; therefore, this will be a 2yr process. I will be house-hacking and investing roughly 22k to make this deal happen. This leaves me with about 15k of my own cash to continue investing; however, I'll have access to an additional 35k of private money for another deal, totaling 50k.

Or, I continue looking for bigger and better deals. 

The problem/question I have is am I thinking too small. With the current conditions of our economy, I believe there will be multifamily and better commercial deals coming up soon rather than later. Should I pull the trigger now or hold onto my cash and continue looking for bigger and better deals.