All Forum Posts by: Brett Van Leeuwen

First of all, thanks everyone for your input. All such great advice and I love building off the fresh perspectives. I'm leaning towards refinancing after reading all these comments and researching heavily over the past week. If you look at my total investment into the house, I could sell it conservatively for $320K, and with the $140K left on loan, that'd be about $180K in equity. Remove real estate agent fees and closing costs, and we're down to ~$155K. Question is, can I make more than I am now with that $155K? As of now, $950 is going to principal, and $500 cash flow, so $1450 I'm making a month, or about 9%. Of course that doesn't include maintenance, so take a couple more percent off for that, let's say 7%. The market went up and appreciated ~10% this year!! So maybe it'll get another 3-4% next year too. We'll be conservative and say 2%, so now we are back up to around 9%. Another advantage is that I lived in it for 6 years and did all the work on it so I know it inside and out. All in all, at this point in time, I think selling would not be a good idea. 9-13% return is very good, with a high ceiling dependent upon appreciation. I want to not sell the house, but should I refi with a cash out? Pros to refinancing from a 15yr to a 30yr with cash out of 50K: -I have 50K cash that I don't get taxed on at all, not even income tax. -I can sit on that 50K until I come across a great deal. -My monthly payment will go from $1480/mo with the 15yr down to ~$1150/mo with the 30yr even with the 50K cash out, so now cash flowing $850/mo vs $500/mo... I'm also going to be increasing rents a little bit soon since this market has gone crazy. -at only 3.8% interest, banks are still giving money away. I believe I can take that 50K and do at least 6% (hopefully more) once I find the right deal with the right amount of renovations at this point in my life--31 with 2 kids. Cons of refi with 50K cash out: -back to the puny $250/mo towards principal with the 30yrs -slightly higher interest rates since it's spiked from 3.4% to 3.88% in the past 2 weeks. Still, that's only about $50 more a month, so not end of world -house will no longer be paid off when my girl is almost in college -while sitting on the 50K looking for that next great deal, I'll be getting a puny 1% in a lame savings account All in all, I'm going to lock in a rate now for a refi with cash out and think about it during the grace period of the interest rate lock. Once I reread all these comments about 5 more times, then I'll hopefully feel 100% confident in the decision I make :-). Thank you all so much. Brett

May also be worth mentioning that the roof needs replacing next summer. There was a fresh coat of paint inside and out in the past couple years.

Hi BP! Would like the advice of the collective BP mind! I have a single family (1925 built) rental property in Bellingham, WA I purchased for 190K in 2009. Lived in it for 6 years. It had an unfinished basement that I remodeled, leaning mostly on sweat equity. I am currently renting out the top portion (2 stories, 3bed/1ba--1400sqft) for $1350, and the basement (1bed/1ba--500sqft) for $650. Tenants pay all bills. I refinanced to a 15yr loan in 2011 at 3.0% interest rate. My monthly mortgage payment is $1480/mo. I've got 10 years left on that loan. I'm having $950 going towards principal every month, along with cash flowing $500/mo. I've got $140,000 left on the principal and it appraised for $300,000 year and a half ago. The local market here has gone up 10% over the past 12 months. Is now the right time to sell? Initially, I liked the idea of keeping this house forever, and it'd be paid off a year before my first kid hits college--easing the pain of the college's financial burden. I've read around that having a lot of equity just sitting in a rental isn't doing much for you. Should I sell now? Keep renting it out? Other options? Thanks in advance for your input! Brett

After 3 hours of slow tapping on an iPad in a hotel room, I built my first excel deal analysis. Copying J Scott's, cell for cell. Only did 1 year out, so not complete yet.

Some notes:

• Even though I'll be property manager, I still put down 6%.
• I haven't walked through it yet, so I put down $0 improvements so that is probably wrong be wrong.
• Couldn't figure out equity accrued. Probably need to build amortization table on 2nd Sheet.

Here is the excel: https://docs.google.com/spreadsheet/ccc?key=0An1Yk_v6Pt8ZdFhyVlRBa25WQ0pCeG16dWxCT3dycGc&usp=sharing

At current numbers, It looks like the cash flow is $379 which is above the $100/unit minimum I've heard on podcasts. However, the Cash ROI is only 6.15% at 20% down. Might as well do other investment channels at that low. Like J Scott says, 10% is minimum.

However, I duplicated the sheet and changed the purchase price to 300K and that brought Cash ROI to 8.78%, closer.

Then I duplicated it again and added $300 more rent to the top floor and added $3000 to improvements to make that happen. That pushed Cash ROI to 12.19%. Now we're talkin!

Once I figure out total ROI, when it adds in equity accumulation then it'd really push that % up.

How did I do? Any suggestions? Where'd I go wrong?

Thanks for any time you spend reading & responding.

Brett

Thank you spending the time to reply.

Good tip about increasing the mile radius search. However, for my first landlord/tenant adventure, I would assume a nearby property would result in quicker response as I iron out all my learning experiences, would you agree?

I'm traveling in Colorado for business with only an iPad a the moment, so I think I'll get a spreadsheet app and try a full blown analysis similar to the great write up J Scott did: http://www.biggerpockets.com/renewsblog/2010/06/30/introduction-to-real-estate-analysis-investing/

Maybe the numbers are on average lower than the 50% rule and it would cash flow $300+.

Some questions on general baselines you like to see:

What cash flow per unit works best for you, that you've found?

What cash on cash return?

And total ROI?

Again, thank you.

Brett

I'm Brett from Bellingham and am interested in multi family homes. Initially planning on buy and hold.

Podcasts got me going and after about 10 I figured its time for me to come join the forums. The interviews they have on the podcasts are insanely educational.

Got a wife and 20month old and work as mechanical/manufacturing engineer, along with some IT work. Always had the dream of being financially stable in my 40s/50s and have ventured out looking in stocks and whatnot, reading some books, etc. nothing really clicked. Until a friend of the family who owns 9 MF homes told me I should get into REI. I loved fixing up my little bungalow and learning the skills necessary, so REI feels like the right path. Very, very excited about it. Hope this excitement can continue for many of years!

Brett

Searching my area for the right multi family investment has seemed impossible with the numbers I've been finding, until now... maybe.

Found a triplex built in 1895 selling for 330,000. The main building is a duplex with the bottom about 1150sqft and the top 1150sqft, both 3bd 1bath. The rent however is 1,200 for bottom floor and 900 for top floor. Without seeing the unit (this Sunday) the only difference I see is there is no dishwasher nor laundry. Is that worth $300/mo? Worth adding a stack set to top floor?

The 3rd unit is a "servent quarters" that is detached and is 2bed 1bath, 728sqft renting for $750. Possible option would be for me to live in the servant quarters for a year to get primary residence. I hear this is good, but what exactly are all the benefits?

So some numbers from this newbie that is I. The current income is $2850. If I put 20% down and get 4.375% that would put my principal/interest at 1,318/mo. Applying 50% rule, 2850/2 = 1425 - 1,318 = 107 cash flow. That might be acceptable for 1 unit, but for 3? No bueno.

The only "creative" things I've thought of is to either try and get the price closer to $300,000--maybe by going straight to the owner if I can find them, and offering 300,000 FSBO (when/if listing expires). Especially since it's been on the market for 300 days.

Or possibly try and get more than $900 out of that 2nd floor 3/1.

More details straight from listing:

Taxes: 2,985

Cap rate: 6.9

Insurance: 1174

W/s/g: 1893

Other expenses?: 189

Any help would be greatly appreciated!

Thanks,

Brett