All Forum Posts by: Jim Kittridge

SC is hard to cash flow with LTR's and the current market for pricing/rates. The taxes for non-owner occupied properties is drastically higher in SC. I'd recommend looking in NC, GA or other markets.

Quote from @Brian Quist:

Thank you so much for the reply Adam. The differentiation between COC and ROI is helpful. My initial question was mostly just to help me better understand how to properly evaluate my properties so that I can decide what to do next - based on what I'm seeing elsewhere in the market.

Question: How and where would you factor in the appreciation of the property?  For example if my equity in the property increased by 50K the last year would you add that to your ROI?

My COC and ROI aren't terrible on this property we're using as a reference.  However, my return on equity isn't as strong. As you mentioned coastal appreciation has put my equity at $570k.  When you run that against the total income of $17,688 you get 3.1%.

Which does lead to your ultimate question of what to do with this info.  I'm leaning towards selling this house soon and moving that equity into a variety of stronger real estate investments: syndication, or possibly building on one of my other properties where I can realize better returns.  Sounds like you have clear goals based on your region and niche.

I appreciate the reply and dialogue. 

You bring up a great point that a lot of investors miss because they focus strictly on cash on cash returns. 

I'd recommend calculating an annual, net return. You can use that to calculate your ROE.

Net Return Components:
Net Cash Flow (after expenses, reserves, and debt)
Appreciation - 2-4%/year
Principal Pay down - use PPMT formula in Excel
Depreciation/Tax Deferred savings - Use your tax bracket to calculate your savings/deferral.

Once you have your annual Net Return, you can calculate your Return on Equity by taking the properties equity (current value - 6-8% selling costs - debt) divided by your Net Return. 

I prefer to be more exact and account for selling costs to accurately reflect the attainable equity, but others may skip including realtor/closing costs.

In general, if I'm getting an 8% cash on cash return, my ROE is likely around 12-16% year 1.

Most major cities that are growing are not going to cash flow well. You need to look at the surrounding towns/cities. I like to invest in neighboring towns within 60 minutes of Charlotte and have no problem finding cash flowing properties. 

Yes, it's worth joining. You'll meet other investors that you can get to know more outside of events.  

Quote from @Jacob O'Malley:

@Jim Kittridge  Thanks for the reply Jim.  Like the Mt. Holly area?  I see some new builds available there.

There or next to it in the Charlotte side. 

It is very doable in the secondary towns as I stated previously. 

Regarding the class, it depends on the area and neighborhoods, just like every market.

You would be well advised to start connecting with property managers and agents who understand rentals. 

It's a good plan and doable if you're willing to submit a full offer with low contingencies before a home is completed. 

If you're looking to house hack, I would look for a home that is a shorter commute to major employers (most being in Charlotte). S Gastonia is great, but probably not the most ideal for professionals looking for a room rental. Most want to be either close to work or close to entertainment amenities. 

Personally, I think the area near the Whitewater Center is primed for growth and would be a good spot for house hacking.

6% CoC is very doable in Charlotte outside of the hotter neighborhoods you mention. Be sure to also account for taxes and insurance in your underwriting.

I'd look at the surrounding towns like Concord, Monroe, Gastonia, etc.. If you have a good agent, you should be able to get one that gets 8-10% CoC. All of the submarkets have strong fundamentals and are seeing an influx of people.

Also, I'd consider buying 2 houses in Charlotte instead of splitting with NJ due to future migration and lower taxes.

You did a good job of assessing the future cap ex outlay.

I'd recommend going through some of the rental analysis videos and posts here. You're missing a lot of expenses and reserves and it will help to understand them better before buying another rental.

For what it's worth, I'd sell on the MLS, relearn underwriting and continue investing.

I would not recommend bending your investment strategy to the market. 

8% CoC with 75% leverage is a reasonable metric. You don't need to go below that and frankly, I wouldn't recommend it unless you have adequate reserves and income to withstand property issues and market cycles.