All Forum Posts by: Jim D.

Good steady tenants are very valuable. If you have to discount a little to keep them, don't sweat it. $25 per month over a year is only $300, which is the same as one week's vacancy. 

My total returns are always higher when I keep the rent slightly below market value, get multiple applicants, and therefore can choose the best ones. Then, I have almost no vacancy because they never want to move when the rent is slightly under market. Every market is different, but that earns me more in the long run.

I don't know of many investors selling in the circles I run in (though that's a limited sample size).

If you suspect a downturn is coming, it makes sense that you'd want to cash out and wait to buy low. However, there are several factors working against you if you do that:

1. What will you do with your funds in the meantime? Just accept 0% return for 5 years?
2. Say we have a solid downturn and prices drop by 20% over 3 years. The investor who holds through that period does lose 20% equity. However, they also continue to pay down their mortgage AND earn whatever cashflow comes in on their properties--something you miss out on if you are on the sidelines.
3. You also have the extra cost of all your selling/transaction fees if you use this strategy of hopping in and out of the market. 

My thinking is that if it's a severe downturn a la 2008, then it would make sense to sell out and buy in again IF you can really time it well (easier said than done). If it's a more moderate downturn, the above factors would probably cause you to come out behind the investor who just sits tight.

I give my tenants (all under the age of 35) the following options:

1. Paypal

2. Venmo

3. Direct deposit into my checking account

They're free, easy, and the payment history is all logged for you online if you miss something. I've never understood why anyone would want to bother with physical checks in this day and age.

That's definitely something you'll want to get assurance from the bank on before starting.

It sounds like your goal is to end up refinancing with enough to completely pay off the LOC, thus acquiring a rental with around 80% LTV but having no money put into it, is that correct?

It sounds like the main reason you want to sell the SFR is to get the cash out of it and put it to a productive use. Have you considered keeping the SFR, and either doing a refinance or HELOC to get the cash out? That way, you can keep the house but also put most of the money to work.

Welcome! House hacking is an awesome strategy. The most important thing is showing your spouse the ROI spreadsheets often enough to ease the headache of moving once a year.

Great you are taking steps to get started. My two cents:

1. If it's your first time owning a rental, I would probably recommend just doing one home to get started. You will learn a TON the first time around which will help you really hone in on what your next purchase should be. Of the three he presented to you, the 4-plex looks the most promising.

2. I would throw all your extra money possible at the credit card debt first and completely eliminate it before investing in any real estate. No sense working your butt off to earn a 15% return on the rental if you're losing 17% interest on the back end. 

Good luck!

Way to go! Awesome results for your first rehab.

I wouldn't even think about bending the rules for the tax break. Do it right and sleep well.

Actually, with an FHA loan, you pay both single premium AND the monthly PMI.

 
When talking to this lender, did you clarify that you are purchasing a multi-family unit? I called many, many lenders over the last few years and was told by all of them that for conventional loans on 2-4 unit properties, 20% down was the minimum required. If that's changed, I'd definitely like to know.