All Forum Posts by: David U.
David U. has started 1 posts and replied 4 times.
Quote from @La Tortuga Amarilla:
Quote from @Stevo Sun:
Hi folks,
I'm trying to get Canadians together to share our experiences. We have a group on Reddit if anyone is interested.
@Stevo Sun
@Stevo Sun Hi, would l be able to get the Reddit link as well? Thanks
Post: Evaluating between two options
- Investor
- Canada
- Posts 4
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Quote from @Logan Padilla:
Quote from @David U.:
Hi everyone,
I'm trying evaluate between two options. I currently have to apartments that I rent out. Both are owned without any debt. One is STR and one is LTR. After all fees, taxes, management and cleaning, i have cash flow of about 2000.
I'm trying to evaluate the two different ideas for adding the next unit.
Option A, I keep saving all cash flow to buy the next unit with cash.
Option B, I take out a mortgage on the third unit and apply all spare cash flow to paying down the mortgage as soon as possible. The deal doesn't cash flow in the beginning because of the mortgage payment, but will once the mortgage is paid off.
What calculations should I use to Evaluate these two deals?
Option B, would have a negative cash flow of 200. So, I calculated a 25 year mortgage and 1800 of additional payments per month. It would be done in 5 years and 2 months. I took the new property and assumed a 3% appreciation during that time, which is slightly under the historical average for the area.
(Total value of the property after 5 years with 3% appreciation)
Vs.
(saved down payment) + (2000 per month positive cash flow for 5 years and 2 months all invested at 5% interest.
I come out a touch over 50k ahead on option B, but I'm probably missing something
I realize there are other ways to do it, but I wanted to see if there is something else I should be considering when weighing these two specific choices.
Two viable options. I've alway been a proponent of preserving liquidity and letting in work in a separate market. If you take out a mortgage with a minimal down payment and connect with a solid financial advisor, you can take advantage of the appreciation of the property, which is going to be the same regardless of how much equity you have, and you can have the rest of the money working for you elsewhere. Once you blend the income from the investment property and the gain from your stock portfolio, you may very well be in the green from the beginning.
That is a good perspective to keep in mind. Thanks.
Post: Evaluating between two options
- Investor
- Canada
- Posts 4
- Votes 0
Quote from @Brian Cauldwell:
Hi @David U.!
Free and clear properties and looking to expand is a good problem to have!
Another option that may help. You could always refinance the two properties at low leverage so each still cash flow on their own. You don't want one property to be supporting another in case things go wrong. So, finding a cash flow you are comfortable with each property would be your best bet.
That way you can leverage those properties to buy the third unit, or get another low leverage loan to keep additional cash on hand for the new property. Liquidity, leverage, and cash flow will be your best friend in scaling your portfolio, and it can be a balancing act at times as well.
Thanks. It is definitely an option.
Post: Evaluating between two options
- Investor
- Canada
- Posts 4
- Votes 0
Hi everyone,
I'm trying evaluate between two options. I currently have to apartments that I rent out. Both are owned without any debt. One is STR and one is LTR. After all fees, taxes, management and cleaning, i have cash flow of about 2000.
I'm trying to evaluate the two different ideas for adding the next unit.
Option A, I keep saving all cash flow to buy the next unit with cash.
Option B, I take out a mortgage on the third unit and apply all spare cash flow to paying down the mortgage as soon as possible. The deal doesn't cash flow in the beginning because of the mortgage payment, but will once the mortgage is paid off.
What calculations should I use to Evaluate these two deals?
Option B, would have a negative cash flow of 200. So, I calculated a 25 year mortgage and 1800 of additional payments per month. It would be done in 5 years and 2 months. I took the new property and assumed a 3% appreciation during that time, which is slightly under the historical average for the area.
(Total value of the property after 5 years with 3% appreciation)
Vs.
(saved down payment) + (2000 per month positive cash flow for 5 years and 2 months all invested at 5% interest.
I come out a touch over 50k ahead on option B, but I'm probably missing something
I realize there are other ways to do it, but I wanted to see if there is something else I should be considering when weighing these two specific choices.