All Forum Posts by: Josh Young

@Zahra Fathollahi you should be looking in Casa Grande, AZ.  Population growth is 6% annually.  You can buy a new build for just over $300k and rents for just under $2k, annual property taxes and insurance for under $2500 combine, 2% credits when you use their lender to get interest rate under 7% if you put 25% down. 

@Nate Hammond I would start with buying one turnkey property via financing and then go for a second one, just keep going one at a time, you will make mistakes and learn along the way.  You will also offset most of your risk by having extra reserves. 

@Greg Heden I like that you are looking at the whole picture, saving on taxes is better than other types of returns because you aren't taxed on tax savings lol. A lot of people on here are not going to like a negative COC, but if you have cash from other sources and/or reserves then you don't need this deal to cash flow year one. If someone buys land and holds onto it they are negative cash flow and almost all of their return is going to come from appreciation, the reality is that real estate in a good location will appreciate over time and that is often the biggest part of the return, the cash flow is more of a defensive measure to make sure you afford to hold it long term.

@Bailey Coleman I agree with @Richard F., it sounds like a perfect opportunity to charge extra fees/rent for storage and get a coin operated washer and dryer.

@Jared Boundy this sounds like a great idea and the best of both worlds for maximizing occupancy and higher revenue for weekend STR. I think it's funny people are saying the logistics are too tough yet people run STR's with new guests coming and going all the time and it seems to work out. I would just make sure it's clearly spelled out in your rental agreement that the regular weekly guest is not allowed to live at the property or receive mail there, it is not a residential lease agreement, they are not a tenant, but they are a short term guest. Have you reached out to Airbnb or any local hotels to ask how they handle this?

@Shekhar Ramaswamy you need to calculate your return on equity (ROE) to let you know if you should add leverage/more debt. Then you need to calculate the blended rate of current mortgage and 2nd position HELOC/HELoan vs cash out refinance. Getting cash flow back to zero isn't necessarily a bad thing if you can pull enough cash out, I know it feels like you are going backwards, but if you pull out 5-10 years worth of cash flow and use 75% of it to buy another property that will also break even (you can find this by putting 30% down in the fringe areas like Casa Grande or Florence) and you save 25% for additional reserves since you will have less cash flow you could grow much faster by doing this. Rents will increase and you could refinance both loans again in a few years if rates go down. Here is a link to a post I wrote on ROE that might help you: https://www.biggerpockets.com/...

@Justin Rush I agree with @Account Closed

My advice would be to take that money and invest it into a deal, you will learn a lot more and make a lot more money from doing deals then you will from any class/program/membership.  If you need more education then read some books, they are much less expensive.

@Jack S. You are smart and I love that you recognize the 15 year term was a mistake (not a big mistake though), I did a 20 year once and later regretted it when I learned to calculate return on equity. If I were you I would consider the HELOC to use as a down payment on another property, a cash out refi would be tough with that big of a jump in rate, but calculate the blended rate and compare the two just to make sure. You can pay the HELOC back when you do a refi on this property or on another property in a few years. You don't want that much equity just sitting there not working for you, especially if you have a high paying job and can afford the payments on the HELOC. You should calculate your return on equity to help you make a decision, but generally as a rule of thumb if your equity gets above 60% in a property then you should take it out with more debt and keep growing; the use of relatively inexpensive debt/leverage is one of the major advantages real estate has over other asset types.

@Greg Heden 

If the money is from a cash out refinance then you are likely paying higher than a 5% interest rate on the money, so you would be losing money if you just leave it in a MM account.

ConC return is not a very good measure of a real estate investment (unless you are investing in class C/D and it sounds like you are not), as you mentioned you will also be getting tax benefits from depreciation and those benefits will be at a high rate because of your tax bracket, so I would try to calculate that and quantify it. Also, if you are investing in a great area then you should calculate some sort of appreciation in property value and rent growth, somewhere between 2-5%.  It sounds like you might not need the cash flow to be positive because you have other forms of income to support your overall cash flow, but if you really feel you must have positive cash flow then you could just put 40-50% down and then do a cash out refinance in a few years when rates drop and values and rents are higher.

I would not ever recommend renting out a non permitted space, especially not as a residence for someone to live in. The DSCR loan on the new investment property will be based off the new property only and should be able to make that happen getting above a 1.0 DSCR, might need to put 30% down, but that should cover at least it will here in Arizona, I'm currently working on deal that's very similar to this. You will be negative cash flow by the amount of the HELOC and repairs/maint/capX/vacancy/management, but if you can afford to cover the negative cash flow then you will be building equity and getting started. When your income improves and you can qualify personally then I'd recommend buying property as a primary residence, the terms tend to be favorable.