All Forum Posts by: Gary Parente

Imagine the impact that would have. That’s more money than Dell pumped into Round Rock when it moved here!

@Manav Mandhani what you're proposing is basically the BRRRR method, just over a longer period of two years. I did this exact thing with my first property I bought here in 2009. I actually did that three times over the years and now have 4 homes that have all appreciated and are cash flowing. I've taken $80k in equity plus around $35K of my own money over the years and now turned it into almost $1M.

Cash out refinancing doesn’t take away equity (except for the amount of the closing costs) if you are using it to go buy another property, because that equity is now in the new property.

HELOCs typically have higher interest rates and shorter terms than mortgages, so you have to weigh those factors in. But they also have lower closing costs.

I just take a broad look at what my cash flow and equity position is before the refinance and what it would be after the refinance and a purchase. After all the fees of the refinance and purchase, are you in a better position from a projected cash flow or appreciation standpoint? That’s how I based my decisions, and I have done phenomenally well here in Austin.

I think you’re smart not to go negative on cash flow, unless that money can earn more interest elsewhere. Meaning, if you’re borrowing at 3.375% but investing that at 10%, it’s completely worth it. Your first property might have a net loss of $300, but your next property might have a net positive of $500, so in the end you’re up $200.

Im thinking of doing another cash out refinance and investing the equity in a combination of a REIT that pays 8-12% and a collector car (my passion). Borrow at 3.375% and expect 8%. Houses have done far better than those returns for me, but I've only invested in Austin and am not yet comfortable with out of state. I can no longer comfortably cash flow in Austin, so I'm ready to have a little bit of fun with some of the equity and enjoy what I've created for myself.

Very interesting move after the Texas Snowpocalypse earlier this year. Smart marketing, Elon. He says “Solar + Powerwall battery ensures that your home never loses power.” We all were wondering what Elon was doing with all that extra land here in Austin.

https://austonia.com/tesla-austin-neighborhood

@Victor Steffen

https://www.loopnet.com/?tab=lease&gclid=CjwKCAjwu5CDBhB9EiwA0w6sLRYcl4UR4AF-uenUOr-Huhqm60GinHCycSxLGoWydOfz1qPoxeIrZxoCl7cQAvD_BwE

I met with my friend today who just built a flex space and this is what he used to attract the tenants.

Hey BP team - I am kicking around the idea of buying a few acres in commercial zoned land and putting up a basic steel building (maybe 10k sq ft?) with 4 walls and a roof and trying my hand at flex/warehouse space. I have a buddy who did this recently in Leander TX (Austin suburb) primarily for his own business, but rented out the other side and said it was incredibly easy. Leased it before the building was even built. 

I own 4 SFH rentals and am comfortable with tenants/landlording. I even have some good equity in those 4 houses that I can leverage. Anybody done this recently in Austin? Anybody tried and failed? Any general advice?

I am hearing 10-20% down to get started and 5-10 year lease terms. Are builders super scarce right now in Austin for a simple build like this?

The Austin growth continues to explode!!!

https://communityimpact.com/austin/round-rock-pflugerville-hutto/development/2020/12/16/elon-musks-the-boring-co-files-for-pflugerville-building/#:~:text=The%20Boring%20Co.%2C%20owned%20by%20Elon%20Musk%2C%20is%20expanding,B%2C%20Pflugerville

Hi BP family - I just got loan estimates for a cash out refinance I am trying to do on one of my rentals. 3.625% for 30 years, but with 3.6% paid in points/fees (plus a $650 appraisal fee).

Loan amount = $187,500

Property Value = $250,000 (75% LTV)

Fees = 3.6%, or $6750, plus $650 appraisal

I owe ~$153K, and there's an estimate of $12K in total closing costs, so effectively I would be paying $12K to get $21K in equity. I am planning to immediately put that money down on a short term rental, but I just can't seem to stomach paying $12K in fees for $21K in cash. Just seems exorbitant. 

I may just rate/term this property to lower my payments and take advantage of the low rates. It's currently on a 4.625% loan, I can rate/term it to 3.5% with only about $6K in closing costs.

Thoughts?

@Bryan Noth very good points that I have actually realized. I put $45k down on a house 3.5 years ago that I now have $90k equity in (after projected realtors fees and closing costs if I was to sell). I doubled my investment in 3.5 years. That’s incredible!

Austin, TX SFH appreciation vs Out Of State MFH vs Syndication - tough to decide!!!!!!!!

Its no surprise that Austin and surrounding areas are appreciating like crazy. I've got 4 SFH rentals that are continuing to appreciate with very little actual cash flow though. I am wanting to replace my day job income with real estate income as fast as I possibly can. I can keep riding this appreciation wave (which for the sake of this argument, and with supporting data, I believe will continue for the next several years at least), or I can start selling these assets and convert to something more cash flow positive from out of state. If I start selling these properties then I would have about $300K to invest in 1-2 years elsewhere (not counting any additional cash I want to throw in). So far I have essentially been performing long-term BRRRRs to acquire more properties: My first rental home appreciated enough that I cash-out refinanced to get the next, so on and so on to get into 4 SFHs currently. I can continue that trend and likely end up with 10 homes in the next 10 years, or I can get out of this and get into something else sooner.

Again I just want to get enough capital/net worth built up to where I can generate life changing income reliably. 

The usual arguments are:

1) Don't bank on appreciation, that's too risky. Except I would argue that Austin, TX is an anomaly here. There is plenty of strong evidence to support betting on appreciation here. 

2) SFHs vs syndication - you accept all the risk with SFH, its distributed across multiple investors with syndication. True! But again, I would argue that the risk that Austin goes bellyup in the next several years is low, so I am willing to accept that risk

3) Cash-flow > Appreciation. In areas where growth is not projected, I could agree. Yet again, appreciation is highly likely to continue here in Austin. 

I like SFHs because I manage them on my own. I'm smart, I work hard, I am handy and can perform most of my own repairs, and nobody else makes decisions for me. I don't like them because they aren't putting a lot of cash in my pocket currently and I have a lot of leverage/debt on my credit. 

BUT...if the goal is to save any income from appreciation or cash flow to keep building a nest egg until its generating enough income to retire on, how is SFH vs OOS MFH vs syndication any different? Isn't this just as easy as spreadsheeting this out to determine what is going to grow faster? If I had something that cashflowed right now, I would just save all that income and keep investing/snowballing it so the next egg grows.

I've got a very good day job in tech sales here in Austin and will never be unemployed. However, I want to quit doing it ASAP so I can go and do whatever I want vs having to work everyday for a paycheck. How do I get there fastest!!!??????

@Neil Narayan also interesting that the Dallas Fort Worth metro area when combined (because they really do just run together) is larger than Houston.