All Forum Posts by: John Woodington

Looking to see if anyone has done this before, and/or if these numbers look worth it:

I have a long-term goal of owning a "snowbird" home in Jackson Hole, WY, but prices there are astronomical.  I saw a listing for a 2 bed/2 bath room in a ski lodge that we have stayed at before.  The room costs $735,000, but the hotel manages it and rents it out on behalf of the owner.  I emailed the agent, and he sent me a financial statement from the room next door, which is identical.  For 2017, total rental revenue was $116,000, total expenses were $77,000, and profit paid to the owner for the year was $36,000.

These aren't great Cash on Cash numbers, but they are a means to a desired end (owning a place in this location).  Also, I would have to do nothing maintenance-wise on a property like this.  It would essentially be a set it and forget it investment.

Any experience doing anything like this?  Any suggestions?

I think @Alyssa Paros is close to hitting this one correctly.

It wouldn't matter if you made tons of money, honestly.  What matters to your wife is she gets up and goes to work in the morning, and you don't have to leave the house if you don't want to.  Even if you are massively successful, her perception is that you don't have to work very hard, and she does.  The money isn't the real issue at all.  If she looked at you and thought, "man, he's really working himself to the bone," she wouldn't feel like she's getting a raw deal here.  But if you rake in $100K a month and make it look like a cakewalk, she's going to feel like she's working harder than you, and that won't make her happy.

I'm not saying you should fake being a workaholic, but maybe have a conversation about all the things you do for the real estate business, so that she understands you're not just sitting around playing Xbox while the rent checks roll in.  You seem to be killing it in real estate, so it's clear to me you're not a lazy person.  But perception in marriage matters, and you don't want this to lead down the road to divorce.  That would be a quick way to cut the jugular on your real estate business for sure.

Hi @Annetta B.

Nothing ever happened here for a few reasons.

1. The numbers didn't work as an investment.  Home values in our neighborhood have jumped 25% in the last 18 months, and while that's great for me as a homeowner, it made the other homes in our area too expensive to work as good investments.
2. The neighbor who was dealing drugs got caught by the cops and was gone for quite a while (he's back now, but so far very few problems), so my immediate need to get rid of the problem got rid of itself, at least for a time.
3. Even as a not-great investment, I would have gone for it if I had the right amount of cash on hand.  With two kids in daycare, however, I didn't have enough in savings to make this work and still have a savings buffer in place.

They still have a number of cars (six?) but we did change our HOA fining structure to allow for much heavier fines in the future, so hopefully the worst of the problems are behind us. That said, this was a good lesson for me, and in the future I plan to be better financially prepared to attempt to take control of situations like this.

Thanks for all the responses.  This is definitely a case of me wanting this deal to work, but the numbers saying otherwise.  I'm going to pass on it for now, and only revisit it if the house doesn't sell for a while and I think I can get in at a better price (i.e. less than $180K).  That said, the houses in our neighborhood have been selling lightning fast lately (3 hours after listing for one of them) so I think this will go quickly for at or above asking price.

Thanks again, BP Community!  Glad I asked!

This house (3 bed/3 bath townhouse) is about 5 houses down from me, and I'm thinking it would be a good investment from a proximity perspective, but would like some outsider opinions on the numbers:

• Price: $212,000
• Repairs: $0 (I know the owners, and they are meticulous, and they replaced carpet, paint, and appliances prior to listing)
• Rents for: $1800/month (based on comps in our neighborhood)
• PITI: $1465/month (Principal and Interest = $910, Insurance = $45, Assoc Dues = $250, Taxes = $200, PMI = $60)

I can only afford to put $30K down on this house, hence the PMI. This house is in a townhome association, of which I on the Board of Directors, so the insurance is low, but the dues make up for that. I would manage it myself. Long term goal would be to own half a dozen houses all in this neighborhood, mostly to build equity via mortgage paydowns, rather than excessive cashflow.

Any objective thoughts would be welcomed.

On the last podcast, the guest said he created a fake listing for a rental he was thinking of purchasing, essentially to test the waters to see if his monthly rate estimate was correct or not.  Is this something others have tried?  I'm planning to rent out my house once we move out, but I want to know ahead of time how much I can rent it for.  Is there anything unethical about creating a fake ad for my own house just to see if I can get a bead on what it will rent for when I do in fact rent it out?

I'm really glad to see this discussion, as it's something I've been struggling with as well.  I tend to lean toward the 15-year mortgage over the 30-year, and here's why:

With the 15-year mortgage, you pay yourself (via property equity) rather than paying the bank (via interest).  The argument for the 30-year mortgage is that you have more cash flow, which is true, but with the 15-year mortgage you build equity faster.  With a 30-year mortgage, you could stash that cash flow in a bank account and save it up to deploy elsewhere.  With a 15-year mortgage you can tap into your own equity pool via a line of credit to do the same.  With a 15-year mortgage you will build your equity pool much faster than you would build your cash reserves with the cash flow from a 30-year mortgage.  In your own example using a 15- year over a 30-year, you sacrifice $100 per month in cash flow, but pay yourself $180 more per month in home equity (this changes over the life of the amortization schedule, in your favor).

The only difference between these two loans as far as dollars are concerned is how much the bank makes off of you over the life of the loan.

Thanks to everyone for the advice here. I got a note from our local police officer asking if any of us on the HOA board would be interesting in meeting with the father to discuss ways to prevent the daughter/others at the house from causing so much trouble. I figured that would be as good a place as any to broach the subject of buying the place from him if it came to that.

I also think the point about them being able to pay $3000 in fines when their selling drugs is spot on. These folks have at least five SUVs in their names at this property, which tells me they're making at least some money. One thing I have been pushing is to get our top tier fines raised, as right now the most we can fine for a rule violation is $100. If anyone has any info about their HOA fining structures work that they have found successful, I'd be interested to hear about it.

Hi @Jarrod Kohl.  I have the same thoughts.  It's a bit of a shot in the dark, but I'm hoping it could pay off.

Thanks, @Kristina Heimstaedt.  I'm hoping his motivation to sell would be to get out of a property that is costing him thousands of dollars a year in fines, as well as numerous letters and headaches from the Association Management Company.  But you're right, it could be that he's fine with the current setup because it keeps a problem child out of his hair.