Quote from @Craig De Borba:
Hi All,
I’ve been learning a lot reading though the threads in this community and finally have something to post about.
My background: RE appraiser and loan financing way back pre-2008 crash, helped family landlord multi-units while growing up.
Situation:
Inherited a duplex but thanks to the change in California Prop 19 it will be reassessed to current market value. This reassessment will be a 1,000% increase in property taxes eating the cashflow. There is a mortgage on the property for 20% LTV (~3.7% int rate). I hope the rate passes and is not refi to todays rates, but I don't know how that process works via a Trust.
My plan:
Sell this property and use as a seed to build a portfolio out of Calif. that I can retire with in 5-10 years, and eventually turn these 2 doors into 20 someday.
Due to current interest rates + tax reassessment, cash out refi to acquire more units will make it negative.
Some basic location criteria
1. States where I can get more for my money. I think I can turn these 2 doors into 8 or more.
2. States that are landlord friendly
3. Lower property taxes, good economic growth, low unemployment
I live in Texas but prices here are getting really high, unless I am looking in the wrong area. Other out-of-state areas I have seen mentioned in the forum are: Ohio, Arizona, Oklahoma, Arkansas.
Any suggestions for geographical location?
Starting with $500K cash + financing I could increase purchasing power to acquire more units vs. paying all cash.
Would you put the min down payment (20-25%) and finance the remainder or pay all cash and not carry any debt?
The properties need to cashflow or at minimum pay for themselves, because long-term goal is to replace my job income.
Considering circumstances and long-term goal, how would you do this?
Thank you
Have you read Millionaire Real Estate Investor by Gary Keller? There's a great section in the book that helps answer your question with simple math under 4 scenarios (see Buy & Retire below). Besides a few basic assumptions, the 2 biggest variables are (1) when you're going to buy and (2) when you're going to retire. The good news is that you've already answered those 2 questions!
Buy & Retire
1. Buy today and retire on the cash flow today
2. Buy today and retire on the cash flow in the future
3. Buy overtime and retire on the cash flow in the future
4. Buy overtime and retire on the cash flow and equity pull out in the future
Congratulations on getting started, on inheriting the duplex, and on making your first BiggerPockets post!
