All Forum Posts by: Josh Young

@Kristyn Cross the biggest hurdle you will have is qualifying for a loan to buy a property. Working only 2 days a week might make it tough, you need to talk to a lender and learn what DTI (Debt to Income Ratio) you will need to qualify, usually a max of 50% if you have great credit, lower if your credit is lower. A good lender will help you create a plan, so you can qualify, that's the first step. Message me if you want to talk to my lender, they specialize in educating first time home buyers.

@Zeke Linman there are lots of paths you can take in real estate investing, but my advise is to not over complicate it, you don't have to have fancy software or an overly complex strategy to start with, you just need to take action, I learned the vast majority of what I know about REI after I became a landlord. Here is a link to a post I wrote that might help you: https://www.biggerpockets.com/forums/61/topics/1096979-how-i...

Also, I live in Gilbert as well and would love to meet for coffee or lunch, DM me and we can set it up.

@Ria S.

You paid $150k for a property and the PITI (including HOA) is $950, current value is $310k and you owe $140k (rate of 2.4%), so you have $170k in equity. Monthly Airbnb rent is $4500 (expenses of 20% of rent, these vary a lot depending on the property, but this is a good starting point), so Net Rent after expenses is $3600.

This means you are getting $2650 of cash flow; $31,800 annually

Plus let's say your monthly principal portion of your PITI is $275; $3300 annually

Plus let’s say your property appreciates 3% on $310k value that's $775 monthly; $9300 annually

Total that’s a $44,400 return on your $170k (26% ROE)

Lets look at the cash out refi on the property with 75% LTV.

Home is worth $310k and you owe $232k (Rate of 6.7%). PITI is $1900, Principal Paydown is $200 and Rent is $4500 ($3600 after expenses)

Cash Flow $1700; $20,400 annually

Principal Paydown $200; $2400 annually

Appreciation $775; $9300 annually

Total that's a $32,100 return on $78k (41% ROE)

In this example you would cash out about $80-85k after closing costs, your return is about $12k less per year, so the question is can you make more than $12k per year with that money with a new investment? I would say probably yes if you can repeat this same investment or something similar to it.

I hope this helps, good luck!

@Ria S. that's a great question. You might be able to do both. For sure access the equity to invest in something else and keep growing, but I would consider a HELOC or even a HELoan to access the equity, this second position debt will likely be at an even higher rate, maybe 8%, but it would allow you to also keep the original loan in place, so the blended rate could be lower than the 6.7% refinance rate. And then you can consolidate both with a cash out refinance in a couple/few years when rates are lower. Your lender should be able to help you make this decision.

@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/...