All Forum Posts by: Cory Carlson

Give me some more numbers and I'll run a house hack analysis for you and see how it performs through the lens of a traditional investor. Some of the returns you realize are seen in the "background". Accelerated pay down for a monthly out of pocket that is "less" than market. This is a great step to start building wealth. To some extent, multifamily CAN be worth as much money as it makes... so if the market is forecasting single family homes to depreciation in the short term, you could argue that if the units are nice and they are getting market rent, the duplex is worth as much money as it makes. What also important is what utility is it serving for you? 

1. Give me some financing details: How much are you putting down, and what rate? 

2. What are the current rents? What is market rent? 

3. Its common for owner occupants to self manage, are you avoiding this? What other expense information do you have? Looking for taxes, insurance, repair/maint budget, management (if applicable), and reserves. If you're unsure, I can estimate the ones NOT in bold. 

Work them both if you have roots in both. Most of my business is in two markets that are three hours apart in Oregon. It’s about the connections and value you bring to your clients. I did focus heavily on one for a year and a half and had some inertia before I moved to the second one. I do travel back and forth at least a few times a month depending on the workload.

Capitalize on your connections in both if you have any interest in doing that

So I made some assumptions and please note this is only to serve as an illustration. 

• 5% Vacancy
• Self managed
• $1000 year for repair/maintenance 
• $1000 year for reserves
• Investor effective tax rate of 15% (you sent me property tax info, effective tax rate is specific to you and off your tax return. 
• 3% Appreciation as requested, for Texas, i doubt it... I would personally use 1-2% to remain conservative.

The projected year 1 returns are as follows: 

(1) Pre-tax Cashflow (Also known as Cash on cash) $1,817 (3.42%), (2) After-tax Cashflow $1,997 (3.77%), After-tax + Principle Pay down $5,980 (11.28%), Total Return (After-tax + Principle Pay down + Appreciation-3%) $13,930 (26.28%). 

As far as single family goes in Texas, the returns aren't overly enticing for a generally speaking, cashflow heavy market. These returns are indicative of a highly appreciative NW market and my operating expenses may be a tad low. In my opinion, for what its worth, keep shopping. But if you have questions about my analysis, shoot!

The 1% rule is a catch all i see mostly used in no-low appreciation markets - please just use it as a quick reference. Highly appreciative markets on the west coast almost never see 1%. I will run a much more thorough analysis for you if you can provide me with some information:

1. What is the expense load breakdown? You said $1503. I am looking for taxes, insurance, repair/maintenanc, management (if applicable, likely 8%), and reserves. 

2. What is your effective tax rate? 

If you don't know i can make some guesses just for illustration purposes. 

@Willy Ayala

There are a couple different approaches and benefits in this scenario that come to mind not knowing the size and class of your multifamily property: 

1. Its an amenity for your tenants which means higher rent potential (if included in rent)

2. If left as an option for those who want to pay a fixed rate (for higher unit investments) the income generated would be considered "other" and when building a pro-forma, you can price the potential of the storage units being fully utilized into a sale price when using the income approach

I'd do the math to see how long it takes to recoup the cost of building them by looking at both earned income and the value-add proposition i mentioned in #2. 

If considering going the commercial route, send me a PM. Financing is not secondary, and should be tailored to fit your strategy. A commercial mortgage broker will be able to negotiate terms that fit your strategy. What markets are you interested in and what is the current financing position in your two properties? 

Following - I am about to start a portfolio analysis for a client with 8 holdings in Cleveland. Would love to have a resource to fact check my work. 

Without some details on the financials its is hard to help you. It looks like a clean property, I would like to see your numbers. 

Have you tried another lender? If your properties are cash flowing they shouldn't count against your DTI I believe. I also wouldn't discount commercial/apartments. While the commercial banks are rebounding from COVID more conservative, asset based lending may be what you need if another lender gives you the same DTI answer. The commercial arm of my brokerage was doing loans pre-COVID at sub 4%...

What markets are you looking in? 

Step 1 is with a RE Attorney to read through the existing agreement. Pay the initial consultation fee and show up to the meeting as prepared as you can be. Thats the best piece of advise I can give you.