All Forum Posts by: Brian Nordman

@Marty Gold I will need you to provide the loan amount, original interest rate, interest rate after purchasing of points, and the cost of purchasing the points.

@Marty Gold if you can provide the numbers I can give you the information real quick for you. As far as it being a tax deduction I am not totally sure.

@Krystof Pilisiewicz There would be several factors that would dictate which loan I would choose. First, you need to consider the costs of the PMI. Depending on the cost of the property this can be quite a hit to your cashflow each month. If your property will cashflow just fine while paying PMI. I personally would would do the lower down payment option so you have more funds to sweep up more properties while the rates are low. But if your property does not cashflow the way you'd like while paying PMI I would consider putting down the 20%. With an FHA loan not only will you have the monthly PMI but you will also have an upfront PMI fee at closing which is generally around 1.75% of the loan amount. So this would also be another sunk cost and increase to your initial investment that you would not get back out. If you like the low down payment option I suggest you check out the Freddie Mac Home Possible Loan. Down payment requirement of 5% and the PMI rate is much lower than that of FHA. Plus once you reach 80% LTV the PMI automatically falls off whereas with FHA you pay PMI the life of the loan. Only way out would be to refinance in say 6-8 years once you reach 80% LTV at which time interest rates could be considerably higher than they are right now.

@Andrew Johnson That is a very good point. Do you think there is something to be said though for making a buy and hold too trendy? I feel like there is a fine line between making minor upgrades such as this to fit the tastes at a given time and constantly trying to keep up with the trends. Like I said, I want to appeal to the higher end renters but also don't want to be making changes every other year to fit the trend. Are there certain colors or styles that are in a sense fool proof? Meaning they will always be in style no matter what fad is currently happening.

@Carolina E. I think you make a good point I will likely hold off on painting them. Would you suggest painting all the trim in the house white? I know that is what is popular right now and I just feel like having a ton of oak or wood in your house is becoming outdated.

In addition to my comment above, I understand your thought process of gaining equity in the property to be able to take out a HELOC later on. But if your goal is to pay down the loan so you can take out a HELOC you need to think of it this way. You are giving the bank your funds just so you can turn around and borrow them back plus now pay interest on them.

@Michael Seeker very well explained! The kicker will always be your cost of debt (interest rate) and the return you are getting. If your cost of debt exceeds your return, pay down that loan! If your return is higher than your cost of debt, then use that extra money to keep growing!

Hey guys, so I'm in the process of closing on a SFH on May 12. I'm going to do some house hacking while I rent out the second bedroom to a friend of mine. The long term plan is to eventually rent the entire unit out. The entire property was renovated inside and out in 2004 and was owned by an elderly couple who maintained the property very well. My plan is to do some very minor updates such as paint and some different flooring options. The kitchen currently has beautiful oak cabinetry but I also know the trend right now is painted cabinetry, specifically white. I want to make this more of a "high end" rental but I also don't want to be continuously doing updates to change with the trends. My thoughts were to paint the walls a medium to lighter gray color and do the trim a white color. I'm stuck on whether I should paint the kitchen cabinetry and if so what color?! Would you recommend going with the white or another color that's in style right now or leave the cabinets their natural oak? I just know once I do it I can't go back so any help is appreciated!

The way I like to look at situations like this is plain old opportunity cost. If you put that extra $300 towards your principal you are only saving yourself 4.6% in interest. Whereas like you stated, if you invest that $300 or rather save it for a future property, I can safely bet you will return more than 4.6%. Anything you make in return beyond that 4.6% would  be considered your gain in this situation. If I were you, I wouldn't pay down the loan faster I would put that extra money towards your next investment. Thanks to compound interest that $300 will be worth more in 30 years if you were to invest it today rather than make extra debt payments.

Logan Allec thank you very much for that information it was incredibly helpful. Based on how the tax advantages would be handled for house hacking a duplex I suspected it would be rather similar for house hacking a single family. I just needed that verification from experience in doing such so I greatly appreciate the advice!