All Forum Posts by: Martin Fletcher

Thank you Kevin. This is very helpful information.

Hello,  Is anyone currently investing in Door County Wisconsin?  What is the market like there? Have prices appreciated significantly in the last year? Any feedback would be appreciated. Thanks Marty

I have one rental in Frederick. Pretty easy to get good tenants. Area is growing. A fair number of people moving from Montgomery county up 270 into Frederick. Nice town.

@Dylan Kennedy Hi Dylan. There are three sources I suggest: your county agricultural extension agent (every county has one), a loan officer at your local farm credit bank, and your local Farm Bureau office. Any one of these should be able to give some good referrals. Good luck. Marty

@Christopher Hernandez. Hi Christopher. Here is my thinking on refinancing to lower your home payment in advance of a possible recession. There are three main ways to lower payments with a refinance: (1) lengthen the term from 15 years to 30 years, (2) get a lower fixed rate, and (3) convert from a fixed rate to a lower adjustable rate. First, I think converting to a longer term can make a lot of sense because with a longer term you can always unilaterally make extra payments to shorten the term if you have extra cash in the future but with a 15 year term you cannot unilaterally lower payments to lengthen the term if you are in a tight cash flow situation. Keep in mind the rates on 30 year are typically a bit higher than a 15 year and you would be paying more total interest over the life of the loan because you are borrowing longer. That said, I think converting from 15 year to 30 year can make a lot of sense if you are worried about a recession. Second, If you can convert from a higher fixed rate to a lower fixed rate, that too can make sense. You just have to do the math to make sure the new loan origination costs and fees do not overwhelm the interest rate savings. Third, while converting to an adjustable rate might lower your payments even more today, I would not do that because you run the risk that rates will go up at the very time you are tight on cash flow. In short, if you are worried about a recession and wanting to lock in improved cash flow now, then converting from a 15 to a 30 year term and/or converting from a higher fixed rate to a lower fixed rate might be a prudent strategy. I hope this helps. Good luck. Marty

@Pete Frederick. Here is how I think about it. When you choose between a 15 and 30 year mortgage, you are trading a modest interest rate differential for 15 years of time. With a 15 year mortgage you get a lower interest rate but you have to pay the loan amount back in only 15 years. This means your monthly payments will be higher because you pay more principal back each month to pay the loan off in only 15 years. With a 30 year mortgage, you pay a little higher interest rate in return for getting 15 additional years to pay off the loan. Because you pay over twice as much time, the amount of monthly principal you pay is lower, which improves current cash flow. In the end, a 15 year loan is cheaper than a 30 year but necessitates higher monthly payments and lower monthly cash flow to meet the shorter term. If the difference in cash flow does not matter to you now and if you believe there is little to no risk it will matter to you in the next 15 years, then a 15 year term may be the best choice. But if you think extra cash flow could be important in the next 15 years or you just do not want to take that risk, then it may be prudent to do a 30 year term. Two additional things I would give thought to: first, with a 30 year mortgage you can always decide to make extra principal payments if your circumstances permit and thereby shorten the term, but with a 15 year mortgage you cannot unilaterally reduce payments to lengthen the term if your circumstances require cash flow relief. Second, in the current interest rate environment where rates are historically low, you may particularly benefit from a fixed rate 30 year term, because (a) it increases the likelihood that at some point over the longer loan term higher inflation will return and the dollars you repay with will be materially cheaper than the dollars you borrowed and (b) you are locking in the use of long term capital at a rate below which you may be able to access capital in the future. I am sure others may have different ways they think about these things, but I hope you find the above thoughts useful. Best wishes and good luck.

@Victor D. Hi Victor. Some of the credit report services also have a simulator that recommends what to do to raise your credit score and/or shows how the score would likely change under different situations. For example, I think myfico.com has this feature. Good luck.

@David Gonzalez I use Goldberg Property Management and they do a great job. They are fully automated so your leases are done electronically and your rental reports are available on line. They do a good job screening tenants. They also have a very responsive maintenance team.

Hello,  I am interested in hearing how investors in single family rentals think about the long term impact of annual rent increases on their overall rate of return. In particular, are investors finding that they are able to increase rents annually at a faster rate than their expenses increase such that their rate of return increases over time? Thanks