All Forum Posts by: Erin Babnik

Can someone recommend a VERY simple app or software program for analysis and bookkeeping? Specifically, we have a commercial property in California that recently had a massive increase in the fire insurance premium. After years of sort of cruising on auto-pilot with a single tenant on a long-term lease, we figure it's time to assess the real value of this longtime family investment in case it might be time to sell. Is there an app for that?

Resurrecting this old thread to see if anyone else might have more insights on the pros and cons of investing in a walk-up unit to rent out.

In my case, the third-floor (1BR) unit in question is already owned by our family and has been rented out for about a decade to one family friend who has been paying a pittance to live there. There is some substantial cap ex coming soon to redo the building's facade, and the flat is in need of major renovations (floors, electrical, kitchen, bath, doors, you name it). On the plus side, the building is in a highly desirable "Class A" location on a nice, tree-lined residential street that is walking distance to the city center. BUT...it's a third-floor walk-up.

So we're trying to decide if it makes sense to retain the property and dump the necessary money into it. I'm worried that it will be too much of a headache to find tenants, even though the neighborhood is highly desirable for young people. The alternative would be to sell the flat in its shabby condition, which would of course not fetch a premium price. Thoughts?

Quote from @Larry Turowski:

@Erin Babnik Wow that is incredibly cheap! What are “normal rates?”  That should be part of the consideration. 

If you are investing purely for cash flow, which describes most of BP, then it doesn’t make sense. And most would tell not to invest for appreciation. I don’t really invest for market appreciation due to my area but if I lived in an area where that was a big factor and I was confident of it and I had access to cheap money, I’d definitely consider it.

Most investors who do really well do so from appreciation, either forced by rehabbing or adding on, or because they are confident in where the market is moving. 

Thanks for chiming in, Larry. Yeah, the 1.6% fixed made my eyes pop, but even the normal rates are still really low here. Our bank's normal fixed rate is 2.1% this month (the 1.6% is a "sale" that could expire in early June). The Euribor is behind the Fed, but rates will be going up soon here.

Your point about appreciation is one I've been hearing a lot on podcasts...that it's a bonus and shouldn't be a rationale for buying a property. We don't really need extra cash flow right now per se, but we do want to make good investing decisions, of course.

As for my confidence in the location's ability to appreciate, I'm struggling to assess those odds. It's currently a great location, adjacent to some the most expensive real estate in the country (the "city center" of Slovenia's capital city). It is, therefore, super expensive to buy in that neighborhood, and inventory is almost zero right now (therefore, having this off-market option through a family member is giving me extra FOMO on top of the cheap mortgage). That said, there is supposedly a huge influx of supply coming on the market over the next few years due to numerous large development projects. Most of those are on the outskirts of the city, not near the center, but they will be shiny and new! Also, who knows how things might shake down if war spreads in Europe...

Quote from @Taylor L.:

That's not a particularly appealing rate of return. I would keep looking and perhaps consider another strategy. 1.6% is definitely cheap money, but cheap money doesn't make a good deal.

Other strategies may be a better fit for your specific situation. Syndications, notes, private lending - there are a lot of other options :)

 Thanks very much for sharing your thoughts! I was beginning to wonder if my question was too difficult for anyone to answer. I'll look into those other options you mention.

Our bank (in Europe) is offering a 1.6% fixed mortgage for at least the next couple of weeks, and we have some cash to invest. Using the Bigger Pockets calculator, I see that our best deal at the moment works out to a "5.94% 5-year annualized return" and a "CoC ROI" of 6.65% after 20 years. That's bad, right? (We are total beginners, with a single rental property that we have only because it was formerly our primary residence.) Can anyone tell me if I'm misunderstanding the analysis of the rental property calculator? Is this a poor investment?

Looking for properties here in Slovenia has been like shopping for toilet paper in the US in March of 2020: there is extremely scant inventory, and prices have shot up similarly to hot markets in the US. The properties for sale are basically a bunch of overpriced table scraps that won't cash flow. We've tried to be open-minded and creative, looking at everything from the nation's capitol to possible opportunity zones along areas where new highways are being built. We've looked at distressed properties and ones that are newer builds. We've kept an open mind about adding value through renovations/additions. There just isn't much to choose from that's viable, unfortunately.

After a very frustrating month of researching and visiting properties, our most interesting option is an off-market deal through family in a desirable location near the "Old Town" city center (an area filled with jobs and tourist attractions). It looks like it won't cash flow until the second year (if I'm working the calculators correctly). From the second year onwards, projections show cash flow becoming positive, but it's a slim margin for a while. After 15 years, we would have the mortgage paid off, so cash flow would be a lot better.

Are we looking at yet another table scrap that we should pass up? If we don't find something in the next couple of weeks, we'll have to miss out on the 1.6% fixed mortgage offer. Definitely feeling some FOMO here. Maybe we should just invest in mutual funds instead and revisit our options in a few years? Would really appreciate some advice. Thanks!