All Forum Posts by: Jack B.

Looking at two houses, one in North Tacoma, WA, built in 1928. Another house is in East Tacoma, which is a less desirable area but the house in question is not in a specifically bad neighborhood, street or block. It is considerably newer as far as age goes, though the interiors are both nice, recently remodeled.

I'm tempted to go for the 1928, as I will likely cash out in 10 years or less and relocate to Florida with the money from it, as well as my other rentals.

Russell, thanks for posting. Can you tell me more on the FM mortgages? Is it as simple as selecting FM as my lender regardless of house or do I have to buy a FM owned property? I suspect they have competitive interest rates compared to the hard money/portfolio lenders?

Agreed on the lack of correlation between interest rates and house prices, but I do suspect rising interest rates will cause the demand curve to shift left, while the supply curve shifts right. This should theoretically lower the market equilibrium or price at which real estate clears the market.

This is unless the economy is roaring when they raise rates, and income constraints for buying are lifted by rising wages. Microeconomics are complex, and it's difficult to ascertain what will happen. I purchase primarily for cash flow, but I try to buy with an eye to appreciation, as I plan to 10-31 exchange my portfolio in roughly 7 years when I retire from my career and relocate to a better rental market (Florida) where I replace my salary managing 10 or more paid off rental properties with the proceeds of these leveraged ones rising in value. The fact that I can keep financing with FM is fantastic. The more leveraged properties I buy at low interest rates the better off my long term plan is, as long as I don't buy at a peak.

I guess the other option is to use a portfolio lender to keep buying real estate as prices draw back, if they draw back, as a form of dollar cost averaging.

Trouble is, all the ones I've seen thus far want 12% interest, at least according to a couple of web sites I checked.

5% I could see, but 12%??

I have three properties, one paid in cash and two with mortgages. I still qualify for 2 more conventional mortgages which I am hoping to use before rates go up.

At first I was having trouble finding decent properties with cash flow, but then I decided to focus on Tacoma, WA where one of my rentals is and prices are still low enough to make a profit for the time and risk invested.

One thing that concerns me is that rising interest rates will put a damper on the economy, pulling housing prices back down. This of course would be an advantage to me if I were still paying cash for houses, but I've since discovered the benefits of using leverage, as such, any pull back in prices will hurt my net worth temporarily. I'm more concerned with cash flow, though I buy with an eye to appreciation as well.

I've done well so far, buying over the past five years my rentals are profitable, and have doubled in value. I want to keep doing what's working, but am worried that once rates go up housing prices will come back down. According to an article on Forbes where they looked at historical records, when interest rates rose, housing prices actually went up as well, at least in most cases.

What would you do?

I picked up three properties in the past five years that, due to the great prices I got them at, cash flow very well.

Of course now that the market has recovered, the price to rent ratio is not favorable. Not even outside Seattle, like Tacoma, etc.

It's frustrating as I would like to buy a few more properties but this area is a crap shoot for rentals at the recovered prices. Eventually I plan on moving to Florida where I will retire, not only because of the weather, lack of state income taxes, etc. but the excellent price to rent ratio. I can buy a house for 1/3 the price of the houses here and make 3 times as much money there cash flow wise.

Is anyone else giving up on Seattle real estate and looking elsewhere? Trouble is, I'm not sure about turn key rentals as I've seen some experienced investors like freedom mentor (Phil P) try them and get out of them, recommending that you be within driving distance of your rentals.

Background: 

-I failed to do the walk through inspection with tenant before they moved in or get pictures when I moved out. I just have my gf and the original pictures from when I bought the place as evidence of condition. I obviously do this now with other rentals, including this one. In fact, I intended to with this one, but the tenant suggested they go through and take pictures, which I'm not sure if they did or not.

-Carpet and paint are about 5 years old. I lived there for 26 months myself before I turned it into a rental and it was nice other than some minor smudges here and there.

-Security Deposit: $600

-Non Refundable pet deposit $400 (for two cats, though they got an unauthorized dog after the fact).

-Lease agreement is in my favor as they are responsible for damages and prevailing parties attorneys fees (although that could go against me too), etc.

Tenant of 26 months is moving out. Paid rent on time, if not early, rarely a bother, etc. They trimmed the bushes off the roof of the house, bought a new mail box out of their own pocket.

But I'm finding a few things that I'm not sure whether they are damage or not, and others that are clearly damage, but so minor that I'm wondering if it worth the hassle dinging their security deposit.

Tenant is a married couple with two kids, though, they violated several terms of the lease:1) Got a dog [pit bull] that was not allowed. 2) Her sister and what appears to be one of her kids moved in with them at some point apparently after her divorce, I presume less than a year. 3) They got a pool that, along with the dog, caused me to have to get new insurance which was a huge hassle since I have 5 policies and an umbrella policy and have to move them all to get the best rates and the umbrella...

With that background here come the questions:

Obvious damage but not sure if I should ding them:
-Two torn/missing blinds in front of house. These blinds were brand new, about $60. Guide says that dusty or faded blinds are normal wear, but torn or missing blinds are damage...

-Torn carpet in door way of one of kids rooms. Tenant cut a piece of carpet out to put in it's place, about the width of the doorway and 8" tall. Better than before, but still, the carpet was 4.5 years old and I never once wore shoes in there or ate or drank in carpeted areas. Guide says this is damage...

-Window Screens are torn all round house. Guide says this is damage...

-Trim around bottom left of door frame of one of kids bedrooms is banged up and needs to be replaced. Probably have to do all of the trim in that room to make it match. Guide says this is damage...

-Door to back bedroom has a hole in the back of it. This was a brand new door BUT, I will replace out of my own pocket anyways since it doesn't fit the doorway right; it doesn't close all the way. Damage...but will not be dinging them on this one since the door needs to be replaced anyway.

-Noticeable but not terribly strong pet odor throughout house, which according the guide, is considered damage...



Things I'm not sure about:

-Walls and doors are dirty in many parts of the house. Not like, oh man, that really stands out like somebody threw a pot of soup on it, but obvious smudges and marks from the kids putting their dirty hands on the walls. Washington state has no legal definition of normal wear and tear, but there is some guidance documentation that states that nail holes, paint etc. are normal but large holes in the walls are damages. Looks like this could be normal wear and tear.

-Vinyl flooring by back door is torn up. Cheap and easy fix, but should I eat the cost? Guide says this is damage, but is it worth dinging their deposit?

-Cold water handle for bathroom is crooked now. Guide says this is normal wear...


Also, the tenant had mentioned they were going to paint the interior. When I brought it up again later, they kind of pushed back by being hesitant to say anything, so I think they are trying to weasel out of it. Too bad I didn't get it in writing, though I do have an email where they said they will need time to clean and fix the place up after they move out.

Keep in mind, most of these items I can fix out of the pet fee, but it should really come out of their security deposit. With Grad school, work and other rentals in play, is it worth the hassle in this case?

So asking for people with some credentials and facts to post instead of the usual Joe that usually states, 'Well I think that just because it hasn't happened in a long time doesn't mean it will again' is considered denigrating people in your mind?

Asking for people with education and credentials in this area, or those who have researched the works of others with education and credentials in this area to post their findings on the subject to refute career scientists that all agree this is going to be bad is wrong, but people, like posting mere opinion based on nothing is OK?

Got it. Thanks for posting.  Please excuse my desire for facts rather than conjecture such as that which you posted. You've convinced me...

Anyone looked into this and projected whether the market will stay hot? I've got class A in 98039 and considering buying in 98402. Wondering what interest rates will do to the market and thus the prices here. Worried if I don't cash out, I could get stuck either holding longer than I wanted, or selling with much less profit if there is a market down turn.

Looks like several credible scientists from different organizations and universities agree that it will likely happen sometime in the next 50 years and will likely be the worst natural disaster in the countries history. 

I think sticking ones head in the sand and saying oh, it's just scaremongering is ignorant. These are scientists from respected organizations. Joe Blow on the street who says it's just scaremongering has what credentials and evidence exactly? 

That said, is anyone planning on selling off any assets in the PNW that might be affected by this? Is anyone no longer going through with purchases after learning of this? 

The thought has crossed my mind. Luckily everything I own is EAST of I-5, which they say should be OK, but still. It could be worse than what they say. The thought of selling and buying in another location without such risks, preferably low cost of living area, is appealing...

I think I saw some threads with your posts about that, but don't recall the details. Yeah, my experience merely living in an HOA has been awful. I get a notice for a couple of small weeds barely visible up close, yet my neighbors can place basketball hoops in the middle of the street (not allowed), window AC units (not allowed) cars parked on sidewalks and in once case a lawn for a month (def. not allowed), etc. I can't get them to enforce the important things yet they can take my house away if they decide to nit pick me to death, since apparently HOA's have very little regulation they have to follow and they are allowed to pick how they spend the resources to enforce, which rules to enforce, etc. Washington state has some restrictions by law that regulate these associations, but with a lot of leeway; they are allowed by state law to put caps on rentals or outright ban them.

So if the HOA does decide to ban or put a cap on them, I have no recourse, since the state agrees. I would absolutely not buy long term in an HOA again, but right now the opportunity to turn it into a lot of money is making me asses if the risk is worth it. If I can buy the other one and hold it, along with my current house for 5 years (have lived in current house 1 year) I should be able to net well over 500K after all fees. That's with about 137K invested between the two properties.

So I'd have an additional 500K in equity in addition to the 500K I have now, not counting what I save up in those 5 years from my full time job (500K). FI with a huge buffer for law suits, life changes, health issues, etc.