All Forum Posts by: Dylan H.

@Jonathan Newsome Is there an inspection contingency allowed in your typical contract?

@Arianna Crawford

Got a friend who bought in the Ferry Pass area and is house hacking there. It’s a good location and the area is booming. Just know that it’s a solid 30+ minute one way commute to the API building. If you didn’t do powered flight and validate IFS I’m not sure that I’d recommend it since you’ll probably be at NASP for 8+ months with the wait times. Then you might not even get Milton for primary and you’ve been commuting all that way for nothing, but up to you.

1% rule is a rule of thumb saying that your home/property needs to rent for 1% of the purchase price / month and you should at least break even in the long run. Expenses like CapEx, maintenance/repairs, management, and vacancy dig in to what cashflow you thought you had over the long haul.

Example: You buy a $150k house, you need to rent it for $1500/month to break even. Obviously also the amount of leverage plays a large role. It's more of a traditional financing rule. So being 100% leveraged using the VA loan you really need to be doing your best to meet the 1% rule. You can get creative with medium term rentals to flight students by furnishing the place, making it all inclusive and bumping the price up further. If someone can $700/month for a fully furnished room with utilities included, that's a great deal and they're still saving half of their BAH.

Hope this helps!

@Arianna Crawford Pensacola is a great place to get your first house hack going. It can be difficult to find small multifamily (2-4) here unfortunately, but as long as you find a place where you can meet the 1% rule when you move you’ll be good. I’d recommend outside the back gate or up in NE Pensacola between NASP and Milton.

@Raj Patel You should be able to use one of the BP calculators pretty easily for a 9 unit. It allows you to add each units rental income, and you could use the BRRRR calculator if it's a value add.

@Dan Mackin

Economies of scale is really the driving factor. The fact that one closing can result in acquiring multiple doors vs one, and realizing that if my SFR is vacant that property isn't doing anything. Where as with a multi if one of the two, ten, or 50 doors is vacant it isn't a big deal. You can also acquire multi's at a much lower cost/unit, which will in term drive a higher ROI. A mentor of mine also made the point that the commercial lending process is much easier to deal with then the residential side of things. We'll see how it goes!

@Dan Mackin I just made the millennial cut (maybe unfortunately haha)!

1. Currently house hacking through a VA loan, will move in about 6 months and it will be my first full rental. It's an SFR where I currently rent bedrooms, unfortunately not many 2-4 units in my area.

2. Just started actually investing since I just graduated college. Now I'm looking for value add multi family (primarily commercial 5+ units) in my hometown since it's a market I know and I'll move around a lot with the military.

3. Just take action, once you have the baseline knowledge you can learn along the way. As much as I'd like to have a system for every step of the way, it's not needed until it's needed.

@Maurice Smith

Should you be worried? Only if you have tons of money tied to the stock market.

@Jon S. Yes I'd be happy to elaborate! 

Let's break it down: $150,000 Duplex, 20% down ($30000), 30 Year Fixed Rate mortgage at 4.5% = Mortgage payment of $608/month, Each side rents for $775 = $1550/month in rent, 50% Rule for expenses ($775)
These assumptions result in a monthly cashflow of $167, we'll round down to $150/month to keep the numbers round. $1800/year in cashflow = 6% COC return of your $30,000 down payment.

Now, some important and EXTREMELY conservative assumptions. 0% appreciation of your property and your investment account is a Roth so you will not pay taxes when you take out the money. 

In 30 years you will own the duplex free and clear, have earned $54,000 in cashflow that you most likely didn't pay taxes on if you have a good accountant. So, that's $204,000 earned over the 30 years. Your $30,000 investment compounded at an 8% rate and is now worth ~$302,000. So, the stock market would win. The S&P500 compounded at roughly 7.85% over the last 30 years, if you assume growth will continue at the same rate it did over the last 30 years, then chose the stock market. If you assume virtually any appreciation in housing values, then the real estate investment wins (historically 4% appreciation for home values in the US). 

The point I'm trying to make is that if absolutely everything goes right for the stock market and everything goes wrong for the housing market then stocks would win.(That's not how it works, everything is tied together, it's literally impossible) If trends continue to be the same, real estate would win. There's lots of important assumptions to take into consideration for both sides, and when you apply conservative and modest assumptions to real estate it crushes the market. 

@Joe Splitrock

I think to analyze that perspective you really just need to look at supply and demand. There is a shortage of supply for housing in most “good” markets currently. As long as there’s a demand, people will just have to settle for renting if there are no houses for sale in a specific market. If it’s a diverse market, with quality job supply, then people will live there, even if it requires them to rent and they would prefer to buy.

@Timothy Hero . Like @Joe Splitrock said the factors in today’s markets are completely different than 2008 and I don’t think we’ll see anything like that ever again. But, everything is connected, so a smaller real estate value correction is always possible.

As technology improves and knowledge becomes more publicized about the value of cash flowing real estate, prices will continue to rise because the demand is always going to be there. People are starting to understand just how volatile the stock market is, and how safe conservatively analyzed income producing property is. If someone can lock in long term leverage for just 6% COC returns, it's still a safer and more profitable return than 8-10% in the market.

More and more money is pouring into the real estate sector, not because it’s hyped up, but because people are becoming more educated. Which I believe will continue to drive prices up in the long haul.