All Forum Posts by: Dan D.

It doesn't cash flow by the looks of it, and the tax number seems high for a property that value.

If it's a high demand area, you have to ask what will it rent for in the next couple years and what could you sell it for in a few years?

Are there many homes for rent in the area?

Is there new housing nearby?

Is there room for new housing?

Is the city population likely going to increase or decrease?

If you had a half acre of land that was bare and decided to build a house like what you are looking at from scratch, what would it cost you for the house (and the land purchase)?

Are there jobs nearby?

The numbers are what they are.

A guess.

When buying rental property, you're essentially making several guesses.  Just like when you invest money in the stock market.  You don't know that an ETF will return 8-9% annually, but it's your best guess.  But it might not.

You said it's in a high demand area.  So will rent prices escalate faster than your expenses?

I prefer single family homes myself just to avoid an HOA fee. If you look at your numbers, the HOA is doing better on this deal than you and the property manager combined, and who's doing the work?

Check what the HOA covers. Your CAPEX number will be influenced by what they cover (snow removal, exterior repairs, common areas, etc).

Hi Marty,  Credit Unions seem to have issues with going beyond 15 years.  Look to other choices for traditional 30 year options on investment properties.  www.interest.com lets you search for rates in your area from a variety of lenders.  Main limitation might be needing to put 25% down.

As you mentioned, (and David), understanding the mortgage amortization is key and that's why I only do 30 year mortgages.  With rates as low as they are, I want to have as much money at those rates while inflation occurs in the coming years.

Make money of debt, hedge against inflation, and improve your monthly cash flow and leverage simultaneously.

Good luck!

In the area I'm in, newspaper articles say the market is "slow" because of the number of transactions that are taking place are less than hoped / expected.  But it's a limitation on the supply side instead of on the demand side.

The story seems to say that first time buyers are frustrated because the market is too expensive because when homes are built, they are going for over-list in these very desirable areas.  Or the other issue is that there are no "starter home" new construction.  (An example in Mpls would be no houses for sale for under $350k in the nicer suburbs).

So your choice is either a beat-up house for under $350 in nicer areas, or new construction for the same price a few more miles out.  Anything else listed for less sells for more than seems appropriate for what you're buying, but that's where demand is taking it.

From the one college marketing class I took, this would tell me that prices would continue to increase until demand disappears / decreasing, or until the market somehow becomes over-saturated with affordable homes.

It appears there is a large group of millennials who have not yet purchased homes.  At some point they will want to move out or quit renting apartments one would think.  Also, baby boomers aren't downsizing as some had hoped.

The varying factor would be interest rates, but that can only go up which would limit the buying power.  

On the selling side, some people might be encouraged to sell their asset to make a higher rate on bond rates if interest does increase.  (Either those who have multiple homes or those looking to downsize).  I highly doubt that's something that would happen quick enough to flood the market however.

Thoughts on this.  Any other factors I'm missing that would tend to change the direction of the market?

Hi Lloyd,

I think people get too worried about getting organized rather than jumping in.  I'm making an assumption that you haven't purchased your first property just by how the post reads.

This isn't rocket science.  People buy properties every day for Zero cash flow.  Instead of cashflowing, people decide to live in them and call them "home".

Go look at active listings.  See which houses seem the nicest for the lowest prices and check local rents.

Come back with some options and the community itself is always happy to help recommend a good buy from a bad one.

At worst case, you end up moving into a property you bought and call it home for a couple years.

What are the tasks you're going to have the assistant do?

Are they tasks that the assistant will see and determine they'll eventually be better off doing for themselves, or is it help like sending out mailers, etc?

Only you can decide on when the timing is right.  I'd say sooner is better than later.  But it has to be work that will free up your time so you can better focus on even more profitable / rewarding areas.

Any pictures you can post?

I had similar interests in becoming a financial advisor and as an investors in real estate it seems like a great match because you'd be able to holistically provide your customers with a broader vision than most insurance salespeople who act like financial advisors.

With that said, the issue could come from a standpoint of recommending any property for a client to purchase.  I could see the possibility of a client who purchased a house while using you as an agent later suing should the market drop.    As a real estate agent alone, you're less likely to get sued since you don't control the market.  But as a financial advisor, you may have advised them to buy the house which muddies the water.

Conveniently in their argument, they might suggest it was you as the financial advisor who told them to buy the house that lost money.

But yes, I've not an RE agent or a FA, but the thought had crossed my mind.  It makes a logical bridge since many people's greater net worth is wrapped up in their house, but some thing are probably best separate.

I don't know legally what responsibility they have, but in order to truly enter negotiation with a seller, you need to submit a formal offer.

If you like the property, I'd strongly suggest to my broker to submit the formal offer to at least get a response.  If the seller responds with a counter, negotiations have begun.  If they decline with no counter offer, you know they are perfectly happy keeping the property.

My approach is that when I look at a house, there is seldom a house that I won't put an offer on.  The question is solely what the offer will start at.  In my opinion, you're not really in the game until you're submitting offers.