All Forum Posts by: Jon Gorman

Hi! 

Between some others in my family and myself, we own a few different properties. Some of these are paid off and generating rental income that we rely on for living expenses. We are interested in buying a beach house that we would rent out part time through weekly vacation rentals and would enjoy ourselves the rest of the time. The beach houses in this area are expensive, and may not be the best investment in terms of rental income, but we would really enjoy going there when it's not being rented out. Given our current properties, is there a creative way to do the financing that would allow us to buy the beach house without losing our current rental income ($6250/month) we are relying on? Newbies here, so please give an easy-to-understand answer without too much jargon! Thanks in advance!!

Details:

Current investment properties:

Rental Property #1 - Valued at 625,000. No mortgage. Rental income = 2600/month

Rental Property #2 - Valued at 725,000. No mortgage. Rental income = 3650/month

(the above income is needed for a family member's living expenses).

Rental Property #3 - Valued at 480,000. Mortgage (4%) = 245,000. Rental income = 5250/month

Rental Property #4 - Valued at 362,200. Mortgage (3.75%) = 111,400. Rental income = 2060/month

Primary residence #1 - Valued at 550,000. No mortgage.

Primary residence #2 - Valued at 789,000. Mortgage (3%) = 490,000.

Prospective beach house:

Price = $2,000,000. Rental income: assume $6,500/week (26,000/month) for 4 months, so 104,000/year

Thanks everyone!

Thanks everyone!

 Not exactly. If they sell now, they would put all that principle into other investments and take out about the same amount in dividends that they were making in rental income, leaving the rest to continue to appreciate.

Posting on behalf of a family member:

“I am trying to decide whether to continue to rent vs. sell two investment properties. Two equally important goals: first is to maximize return on investment without eating into principal; second is minimize headaches/stress/uncertainty. I am retired and living in a paid-off house. If I want to have enough investment income to maintain my current quality of life, is it better to continue to rent vs. sell these properties and put the money in the stock market instead, and live off the dividends?

Both properties are in NYC:

Property 1:

• Valued at 800k
• No mortgage
• If I sell, I estimate walking away with 720k after fees and capital gains
• Rent = 3300/month; expenses (condo fees, etc) = 1550/month. So yearly profit is 21k

Property 2:

• Valued at 625k
• No mortgage
• If I sell, I estimate walking away with 562k after fees and capital gains
• Rent = 2400/month; expenses (condo fees, etc) = 800/month. So yearly profit is 19.2k

So if I sell both properties, I would walk away with 1,282,000. If I put this in the stock market, I would need to make a return of 3.14% to match what I’m making in rental income.

Some variables include: fluctuations in the NYC rental market and value that properties may appreciate, increasing NYC taxes and condo fees, fluctuations in the stock market, maintenance costs that will be needed in the next few years that will not do much to increase the value of the properties.

I am not interested in leveraging these properties to buy a third. Too much headache for me.

In 10-15 years’ time, which is the better decision? Keep renting or sell and invest in stock market?

Any advice?”

Posting on behalf of a family member:

“I am trying to decide whether to continue to rent vs. sell two investment properties. Two equally important goals: first is to maximize return on investment without eating into principal; second is minimize headaches/stress/uncertainty. I am retired and living in a paid-off house. If I want to have enough investment income to maintain my current quality of life, is it better to continue to rent vs. sell these properties and put the money in the stock market instead, and live off the dividends?

Both properties are in NYC:

Property 1:

• Valued at 800k
• No mortgage
• If I sell, I estimate walking away with 720k after fees and capital gains
• Rent = 3300/month; expenses (condo fees, etc) = 1550/month. So yearly profit is 21k

Property 2:

• Valued at 625k
• No mortgage
• If I sell, I estimate walking away with 562k after fees and capital gains
• Rent = 2400/month; expenses (condo fees, etc) = 800/month. So yearly profit is 19.2k

So if I sell both properties, I would walk away with 1,282,000. If I put this in the stock market, I would need to make a return of 3.14% to match what I’m making in rental income.

Some variables include: fluctuations in the NYC rental market and value that properties may appreciate, increasing NYC taxes and condo fees, fluctuations in the stock market, maintenance costs that will be needed in the next few years that will not do much to increase the value of the properties.

I am not interested in leveraging these properties to buy a third. Too much headache for me.

In 10-15 years’ time, which is the better decision? Keep renting or sell and invest in stock market?

Any advice?”

Hello,

A bit about my current situation: I own my current home (currently paying down mortgage, 2.9%). I have been renting out my previous home and with the rent I am collecting, I am netting approx $500/month on top of the mortgage (3.75%) and other expenses. I also have a commercial office space (5.25% mortgage) that I use as my office and rent out other offices in the building for some passive income.

My goal is to retire as soon as possible, which I define as having enough passive income from investment properties to cover my living expenses. This will happen one I pay everything off (both investment properties) as well as my current home. If I pay everything off paying only scheduled payments, I have about 15 years left on both investment properties and 30 years left on the home I live in (we just moved into it within the last year). But, if I pay off the mortgages more aggressively and snowball to accelerate payments once the first property is paid off, I can have everything paid off in 10-15 years.

My question is: How should I think about strategizing reaching my goal as quickly as possible? Should I prioritize paying down current mortgages as fast as possible with any additional income vs. leveraging investment properties to buy an additional property vs. selling our old home to trade up (e.g., buying a vacation rental in a high-demand area)? How would you make this decision?

Thanks!

Jon

I'm in the same boat! If anyone can offer a referral for a specific financial planner who is knowledgeable about RE investing, please let me know!

Thank you all!!

Hello,

I recently moved into a new house and am renting out the townhouse I previously lived in. It's the first time I am renting to a tenant. The new tenant moved in Sept 1. Shortly thereafter (within a week) she told me she found mouse droppings so I paid to have an exterminator visit the house and do a treatment for mice.

The tenant contacted me yesterday stating there was still evidence of mice. So I called back the exterminator this morning--they offer a discount if they need to make another visit within 60 days. When scheduling the exterminator to revisit the house (which I planned to pay for again), she mentioned that the technician noted in the report from the first visit that the tenant had a pet rabbit roaming around the house, and that rabbit food and feces attract mice.

My lease states no pets allowed, and I also wrote that on the listing. I texted the tenant today asking if she has a pet rabbit. She replied that she is petsitting for her friend who is temporarily in Texas and that the rabbit is providing her daughter emotional support during COVID because she is not socializing as much. She texted me a photo of the rabbit in a cage, stating that she keeps it contained.

I realize I can reply to her and insist "no pets allowed" but how much can I actually enforce this if I am not inspecting regularly, which I don't want to do? I value being understanding with a tenant and the fact that they can feel emotionally attached to pets, but I feel I also have valid reasons for not wanting a tenant to have pets--potential damage to the house and case in point that them having this pet could be contributing to new pest issues. 

How would you suggest responding to this tenant? Do I draw a hard line and insist they get rid of this rabbit (I don't know whether it is their pet or they are just petsitting temporarily--I'm not so sure it matters all that much to me)? Do I make an exception? I feel angry that they went ahead with this without being honest with me and asking permission first, and am now worried about what else they might not be telling me about. Do I negotiate with the tenant and charge an extra fee/pet surcharge each month to cover exterminator costs and the potential for any damage? Any advice?

Thanks in advance,

Jon