All Forum Posts by: Charles Moore

what is your actual ROI now? $475 net cash flow seems like a pretty good number. Is the rent matching the market rate there for that kind of home?

If you did sell it, would it be a 1031, or taking it straight cash? What is the price range you would buy a foreclosure in? And would you pay for renovations out of that $85k?

if you have enough equity in your primary residence, you could take out a home equity loan at a fixed rate, then use that to pay for the whole rental, assuming that leaves enough cash flow every month from the rent. Or just take out enough for a downpayment.

It sounds like you have the Holy Grail of financing. The only thing better would be 0% interest. Maybe target duplexes, triplexes, or four-plexes so you can rent out units right away while you live in one?

Can you roll estimated construction costs into the loan?

You could also rent one unit out to a professional handyman at reduced rent in exchange for his fixing up the whole building.

You could also take 3-5 year loan out from the peer-to-peer lending sites Lending Club and Prosper, up to $35K.

so what would your new PITI on your primary residence be in options 1 and 2?

Also, I ordinarily steer clear of condos and prefer single family homes, mostly because condos don't appreciate as fast as SFHs (in most markets) and the HOA can range from being annoying to just downright getting in the way of your real estate plans, plus they can force you to pay assessments for upgrades and repairs to the whole building that run in the thousands of $.

However, your market may be different because of crazy CA appreciation, and how young folks just starting out can only afford condos as their first primary residence purchase, leaving you with little choice if you want to dive in today to take advantage of low interest rates and expected appreciation.

Hi, Ally. Sorry, I wasn't clear. I recommend just stop contributing to your company's non-matching 401k. As an extension of that, you can actually roll your current Roth 401k into a Roth IRA at no cost and without tax penalty, then contribute your $5500 max per year to the IRA. You'll have greater control of your account that way anyway. Some of the best IRA companies out there are Vanguard - the original leader in low cost index funds or ETFs which beat out actively managed funds over the long term - followed by Charles Schwab. Most other companies piggyback on the funds those companies created, and charge you their middleman fee, reducing your returns. At Vanguard, you can invest your funds in a basic portfolio of VTI: Total US stocks (basically a sampling of all US company stocks), VXUS: Total international stocks (a sampling of all stocks from the rest of the world), and BND: Total US bonds. I personally like to throw in some specialized VNQ: Vanguard REIT (real estate investment trust) ETF because it includes rental income in the form of dividends from various sectors of real estate like hospitals, apartment complexes, storage facilities, office buildings, and retail shopping centers - areas I would not invest in yet personally, but instead through a REIT, which typically has higher dividend payouts than other funds. Direct providers like Vanguard don't charge you mandatory fees to maintain your account like middlemen companies do; instead they provide their funds at cost, only taking a bit from the dividends (called expense ratio) before the dividends reach your account. Anything with an expenses ratio below 1% is great from a cost perspective, and Vanguard's start from .05%.

Regarding Realty Shares, that company only allows accredited/sophisticated investors to invest; aka, rich people with over $1 million in net worth excluding their primary home or over $200K annual income. As for Betterment and Wealthfront, I don't know what their fees are or what funds they offer, but if they require you to pick individual stocks or charge middleman fees, avoid them. Just go straight to the source like Vanguard or Charles Schwab.

Regarding your loan type, I think based on what Frank said, an FHA loan sounds attractive, if the payments with HOA dues are manageable for you. That would mean keeping more of your initial capital for other investments simultaneously, and since PMI bothers you, just think of it like this: the rent from your brother and boyfriend go to pay the PMI, insurance, and HOA dues, while your portion pays principal, interest (tax deductible), and taxes (Also helps on your federal return), or some mix like that. The idea is to put as little of your own money into this asset, and as much of other people's money (OPM) as possible, then reap rewards later.

Then sell after at least 2 years and reap tax-free profit from your expected appreciation to buy another primary and maybe another investment property.

I want to echo what Frank said about  stopping your contributions to the Roth.   I just figured out that was good for me too, with no company match.   Better put that money towards saving up for the next down payment. 

 Are you intending to keep the condo for the long term?   That might help determine what kind of loan would be best for you. 

Hi, Jennifer,

You bring up several points I've seen discussed and learned from here on BP. Being on the west coast as well, I have a similar situation to you. Here is what I have learned:

If you want cashflow that you can add to your income and, more importantly, cover maintenance and Cap ex and vacancy, then anywhere on the west coast - especially CA - performs poorly compared to other markets. CA is an appreciation market, which is a speculation game. Plus you would be tying up  all your capital in one property, thus increasing your risk during vacancies when you have no rental income, but still a hefty CA mortgage to pay.

Concerning cash purchase vs. financing - that's a big debate topic on BP, and each person's situation determines what strategy is best, but for folks like you and I just starting our RE investing careers, financing has a lot of advantages. You can get more bang for the buck (able to purchase more properties), tax advantages with interest deduction, and are only spending your own money in the downpayment while trnants pay for the rest of the property over time, but don't enjoy the ownership incentives you do. If you pencil out a side-by-side comparison of slapping down $100K on a cash purchase vs 4 downpayments with the same money, you might find your 4 leveraged houses combined provide you more cashflow that your paid for property, taking vacancy, maintenance, and depreciation into account.

 Concerning out-of-state investing, consider looking at the reputable turnkey companies friendly to out-if-state investors in lucrative markets, like Memphis Invest in Mdmohis, Dallas, or Houston; companies in Indianapolis, Cleveland, Kansas City, Birmingham, or Fl. A top notch turnkey will manage your rentals for you without your needing to fly out all the time - see what other BP members say about this.

Concerning properties in the $30K-$45K range - I suggest you look at a $60-100K range. Those tend to have higher cash flow because of less vacancy, maintenance, and fewer deferred maintenance items. The higher rent these attract also attract higher quality trnants who take better care of the property, and let you have a much more passive income stream.

Putting all these aspects together, you could for example buy 3 properties in another state financed with 20% down and averaging $200-$250 each month with little action required of you.

Hope this helps!

you've got a cheap fixed rate on your student loans at 6.08%. And like you've mentioned, mortgage rates are even lower today as opposed to the future. If you use your cash now to pay off your student loans, you'll be left with no option later except to use more expensive mortgage rates. Might be better to keep your cheap student loans now AND get a cheap mortgage at the same time.

First things first, though - you might want to get prequalified now. Mortgage lenders don't really hurt your credit score when they run it, unlike credit cards and auto loans and everything else (because mortgages are considered good debt vs bad debt for everything else). You can then get prequalified again in 6 months if you need to; a mortgage lender credit check only affects things for 3 months after it runs, so your time frame would allow for this.

Next, what are the condo HOA dues? You'll have to add that into figuring the three-way split with your brother and boyfriend.

Also, any special assessments on the horizon you'll have to pay?

If you're set on a condo, I might opt for either the 3.5% FHA loan or the other low-money down options, if you three can afford the payments. That way, you can preserve more of your capital and invest it elsewhere, like a downpayment in an out-of-state property offered by a turnkey company in Memphis or Dallas or Kansas City or Cleveland or Birmingham, to name a few.

After you live in your condo for 2 years, you could sell it to take advantage of the appreciation, and take the profit tax free to put into more properties, including another primary residence.

Hi, all! I just received notice that Memphis Invest is having their annual April 29-30 potential investor networking event in Dallas this year instead of the usual Memphis. I was thinking about going when I thought is was happening in Memphis so I could visit that area. Anybody else going to this now that it's in Dallas?