All Forum Posts by: Jason Hill

My rainy day fund isnt big enough to get the PITI down to 50% of rent. Not yet anyway.
Sine my wife and I live below our means we have purchased a house and still have plenty to cover the rental.
My rate is 6% now.

Its not in a good area at all it's a small town where the second largest employer just went bust. However my renters are retired and their family is local so they shouldn't be moving anytime soon. He is disabled military so I dont have to worry about the rent check.

I should have added this in the post but walking away is not an option, both morally or credit score wise. I worked hard to get a 790 before 30 and I'm not going to ruin it now.

I'll try to be as brief as possible.
Cons:
Due to external forces I had to move. I rented my house out for slightly above the going rate $700/mo. however; my mortgage is $750 every month. I owe $90K on a house that at best would sell for $80K now, realistically I would expect to pay $20K after all realtor fees and what not.

Pros:
I always wanted to get into real estate, not necessarily like this though.
I can easily cover the mortgage if my renters bailed.
I have the world's best renters, no complaints there.
The house (2 years old) was built with renters in mind (swelless subfloor, non burstable pipes, etc)
I have a sizeable rainy day fund to deal with issues.

I want to start investing in a buy and hold strategy.

My question: Should I
A: Save to refi my mortgage to obtain the 50% rule.
B: take the $20K hit and start fresh
C: Leave things as they are and invest else where.

D: none of the above.

I appreciate the response and that's part of the allure. Knowing that every penny of profit is yours (other than what's Uncle Sam's). However; for the last few years I've been doing very well in the stock market, somewhere in the neighborhood of 14% a year on average over the last 5 years.

I've been reading up on cash on cash and it seems that people view cash on cash, cap rates, and ROI differently. I guess that's where the confusion comes from.

There apparently is no set standard for how to calculate what your money is doing for you.

It's probably more appropriate to say that there are standards, but many people do not completely understand them. Like me.

That's really my question. What have you paid out, what have you gotten back? There are alot of terminology floating around that are necessary when calculating potential ROI or determining if a property is a good deal or any number of other potentials.

When the rubber hits the road, over 5, 10, 15 years, X dollars have left your bank account and have X dollars of equity, rental deposits, tax breaks, etc, have returned to you.

On our first house we kept track of every dime spent remodeling it and repairing it. All the PITI payments, all the repair bills that a landlord would otherwise do, everything. When we sold the house we compared what we put into the house to what we got back out of it, keeping in mind how much renting would have cost us. During that time we were keeping an eye on related sold properties to have a good idea on equity.

Am I really asking for cash on cash? I guess, only I realize the target audience has their cash wrapped up in equity and other factors, but should an investor at least have an idea on what that is? Shouldn't they have a general idea what their outlay has returned them?

Again, I may be naive.

This question is for those who have a few rental properties 2-10. What is your year on year return on investment. Bottom line, one number, no qualifiers, what has your return on investment been.

I've read about all these great 10% in one month deals, but no reference on how often these come alone, or if their that often. I might be interested in flips if someone can show constant return over time. There is also alot of talk on how much better real estate is than stocks or any other investment. To me the proof is in raw numbers.

I would greatly appreciate any and all responses.

Mike - Thanks for your input. We've been wanting and looking for a way to get out from under it. You've given me more zeal.

Micheal - I appreciate the thoughtful response. Maybe I misspoke, but I have no plans of looking at this as an investment to let sit and make me money. I know that there will be sleepless nights and weeks where I eat, breath and sleep this business.

I watched my father create several businesses, some successful, most not, and each one was consuming.

Secondly, I'm not planning on buying a house and living in it, then flipping it. We like to buy fixers and live in them as a way to save money, not as a business. The rental aspect will, again, be a complete business unto it's own which will be treated as such.

One question I do have for you and others is: Is it a good idea to create a corp for each property to mitigate potential liability losses, or just create one corp (not LLC) to protect your personal assets?

James - Thanks, I have seen that and I counted 60% "maintenance ratio", because as I said in the first post, we like to be pessimistic about our potential profits.

James - no company match.

Curt - your right I don't really want property that I have to pay someone to do minor repairs to or I can't drive by and see how things are going. Especially not my first real property. I could also be wrong on my assumptions on what the houses I'm seeing for rent cost verses how much I 've seen houses like that go for.

On the topic of rent vs. Cost what is a good ratio to look for? Apparently $800 for a $50k house is what I need to set my sights on.

Yeah! :) My wife says I need to limit what I actually say and ask to about 20% of what I want to ask. Sorry for the overload, I just don't want to leave anything out without writing a book.