All Forum Posts by: Justin Atkinson

Thanks @Steve Vaughan . Yeah, I don't really have a desire to own a bunch of rentals if it turns out paying down my principal yields me better payoff. Plus my risk is dramatically lower and I don't have to deal with the management headache. I'm hoping someone finds a flaw in my math or brings something to light I'm not considering. I don't have a lot of deals right now either (most homes are off the market within 7 days...ugh), so my ROI isn't going to be great right now.

I am trying to decide what I should do. Most of the advice I receive is to first build up a good portfolio of properties before even thinking about paying them down. Leverage being the most common advice I was curious if my money would be spent better with another approach. 

I currently have a rental that I owe about $81,000 on at 5% interest. I have a property I just put under contract that will yield me about 10% annual ROI for my $34,000 down payment. Out of curiosity I found an amortization calculator that allowed me to enter a lump sum payment to see how it would change my term and interest paid. The details are below:

Lump sum payment: $34,000

Interest saved: $43,764

Payments saved: 158

If I take the payment I will save I will ultimately generate 158 months cashflow instead of paying my mortgage payment (minus escrow of course).

Cashflow from saved payments: 158 x $498.13 = $78,704.54

Total cash saved or earned from $34,000 lump sum payment = $122,468.54

So now if I take the total term of the loan I am referring to that is 283 months. Dividing the $122,468.54 into that gives me $432/month. Multiplied by 12 = $5,193 / $34,000 lump sum = 15% annual ROI.

I know there are additional benefits to the 2nd property such as tax deductions and appreciation, but besides those is there any reason why I would pursue 10% over 15%?

Go easy if I missed something obvious. I'm still pretty new...

Thanks for the thorough responses. You both confirmed what I was feeling. I think it definitely won't be easy, but based on my past experience and my connections I think I can pull it off.

Before I do anything I'm going to take your advice and look for a similar rehab for a month or so before going the new construction route.

Thanks again guys

Justin

I have been obsessively consuming as much as possible on BP over the last few days trying to determine what strategy I want to follow for my investments. I just completed my first flip and it was an okay experience, but it was definitely my "learning experience" home. I did most the work myself and contracted out maybe half of the rehab.

We have decided we are going to downsize our primary residence to focus to increasing cashflow to get the snowball effect going and then move to a buy and hold model. My original thought was to find a good forclosure or SS for our primary residence and rehab (if necessary) over time.

Another idea that someone gave me was being the general contractor for my own new home. I have a considerable amount of construction experience and I have contacts for practically every trade needed to complete a home in the price range we are moving towards. Before we do anything I wanted to throw it out to the community to see if I can gather any wisdom on pros/cons of generalling (if that's a word) my own home. What kind of equity average could I expect from being my own general? Thanks for any help

Justin

Awesome, thanks for trying Gary Parker and thanks for the input.

Thanks for the replies. Gary - since it seems like a big part of the battle is who you know vs what you know, would you be willing to share the contact info for your guy? If not, no problem, I know some like to keep their contacts to themselves. I am up in the Layton area, not sure if he travels that far.

I am behind schedule on my flip, so I have decided to have someone come paint the whole home.

It is a 1600 sq ft home, split level style and I want it painted 2 tone. I have already prepped all the walls although some of the replaced/new baseboards and casings will require some caulking.

I plan on getting some bids, but I would love some feedback on a reasonable price that I should expect to pay. If it helps I am in Utah.

Thanks in advance!

I am so impressed. I have posted in forums for years and I have never come across such a good group of people. No attitude, just helpful and thorough advice. What a great forum.

Randy - I really appreciate your response. It is dead on to how I am feeling right now. I know I've got to put myself into this thing or I won't enjoy it. I am working on putting together my scope right now. I think this will help me stay focused. I love the stand back advice. I think this alone will help me tremendously as I go through this project. Thanks again

J Scott - Sounds like your approach is what I want to do with this project. I can't stand lack of uniformity and I think this is probably the most unrealized aspect of curb appeal. You can always pinpoint details you like, but the "vibe" (for lack of a better term) of the home I think is a huge selling point.

So my next questions. I should probably start a new post, but both of you seem to have a lot of experience. How do you find properties that have a good spread? This one is HUD and we've looked at short sales. It seems that all have a very tight margin for profit and the competition seems fierce. Any other suggestions on places to look? My budget is way too tight right now to do everything I want/should do to completely rehab this property, but this is the best one that has come up for months. Also, do you think it's a good idea to get my real estate license? Seems like one of the biggest expenses is that 6%.

Thanks,
Justin

I am getting ready to start my first fix and flip. I have a decent background of remodeling and I have a problem with perfectionism. I take great pride in my work so I want it to be top quality. This somewhat goes against the fix and flip mentality from what I can tell. Not that the work I would do would be poor quality, but it's obvious doing the minimum possible while maximizing profit is the strategy.

I realize each home is different, but I'm hoping to get some objective advice on the optimal fixes to make the most profit. The property is only $110,000 and my budget is about $7K. I know I need to paint the whole thing and put some nice floor coverings, I also need new countertops and appliances in the kitchen.

The only way I can describe the property is "frankenstein". It's in decent shape, but every room is painted different, different doors, different fixtures, even different outlet faceplates. It like the last 4 homeowners each took a room and did each entirely different.

My temptation is to make the home flow better by making all the fixtures, faceplates, paint, doors and door hardware the same. I also want to go for soffit and fascia on the outside. I'm hoping some of the more experienced rehabbers could offer some advice. I'm afraid my perfectionism could make my first experience a bad one.

Thanks,
Justin

Thanks for the great input.

Glenn - when I go bigger I am definitely going to use your suggestions. I come from sales, so I think I can nail this when the time comes.

Jeff - I would definitely agree with you. Based on the cost of HML it doesn't make a lot of sense right now since I can go the conventional loan route. It makes sense if I want to spread my wings a bit to then speak with a HML, but for now I am just getting my feet wet. The other point of something happening and being able to just rent it out with the conventional loan vs. the short term consequences of a HML is another huge perk/safety net. I can get a few under my belt with the loan method and then it seems it would be easier to approach a money partner.

Thanks again, I can tell I'm going to like this forum.