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All Forum Posts by: Josh Young

Josh Young has started 15 posts and replied 343 times.

Post: Local house hack available.

Josh Young
Posted
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
  • Posts 353
  • Votes 394

@Jason K. that makes sense at those numbers. $2000 per month is 8% annual rent at $300k, and that seems to be the going rate for class C that has some value add potential, anything nicer is 7-7.5%, even lower in great locations and SFH. When you factor in 20% for expenses (4% vacancy, 4% repairs/maintenance, 4% CapEx, 8% property management) net cash flow is negative $150 per month, which is also typical right now, but refinance in 2 years and small rent increases and it could turn into a great investment, especially with the garage conversion. If I were house hacking I'd run the numbers with only 5% down though, one of the biggest advantages of house hacking is the low down payment because it's a primary residence.

Post: First Time Home Buyer - Looking to get into real estate investing

Josh Young
Posted
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
  • Posts 353
  • Votes 394

@Ruby Lee ask your lender to quote both options, so you can compare them, the rates might be different and the mortgage insurance will likely be different, also consider the upfront costs of each.  Right now I would probably go with the lowest upfront cost loan with the intention of re-financing in a couple years if/when rates go down, and if equity goes up enough you can drop the mortgage insurance when you refi too.

Post: How ignorant am I?

Josh Young
Posted
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
  • Posts 353
  • Votes 394

@Gavin Rein most of "us guys" were in your shoes not that long ago and we are here to share our experience and knowledge.  Don't compare yourself to other people, there is always going to be someone who is bigger and better.  That's great if you want to get a job in real estate to get started, just make sure you pick a job you like, fyi lenders prefer w-2 income.  Here is a post on how I became an investor: https://www.biggerpockets.com/...you could probably do it faster than than me if you rent out the rooms in your primary residence while you live in it.

Post: Are my analysis expenses too high?

Josh Young
Posted
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
  • Posts 353
  • Votes 394

@Brandon Dietz if your property has a unique feature then maybe budget that as an additional expense, but I will also add that these expenses don't happen all nicely spread out like the budget, so having 6+ months of PITI payments as reserves is very important, maybe even a little higher if you think some of the cap ex items could be near the end of their useful life.

Post: how are people able to get deals with little to no money down?

Josh Young
Posted
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
  • Posts 353
  • Votes 394

@Aj Oxley you should buy a primary residence with a 5% down payment conventional loan, and keep your current home as a rental, do this again in a few years and you will have a couple rentals with cash flow, equity, experience and options.

Post: Looking for tips on analyzing deals

Josh Young
Posted
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
  • Posts 353
  • Votes 394

@Jennifer Stammberger I agree with @Kevin Sobilo use a percentage, I use 4% vacancy, 4% maintenance/repair, 4% Cap Ex, 8% property management, so 20% total, but up that to 25% if it's an older property or class C property, and then if it's a newer condo where HOA covers more maybe go down to 15%. Residential conventional financing counts 75% of rent to offset PITI, so that's 25% expenses, they also want you to have 6 months of PITI payments in reserves, reserves is the key because these expenses don't come all spread out like the budget, they often happen a couple or even a few at a time. Extra reserves will make budgeting expenses a lot easier.

Post: Are my analysis expenses too high?

Josh Young
Posted
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
  • Posts 353
  • Votes 394

@Brandon Dietz

Expenses should be based off a percentage of the rent, This is where I usually start: vacancy 4%, maintenance/repairs 4%, Cap Ex 4%, property management 8%. This totals 20%, but if you have an older property or class C property then you might want to jump up to 25%. So if the rent is $2000 per month you'd only count $1500-$1600 towards cash flow. Taxes and insurance can vary a lot depending on where you are, but I lump those in with my debt to make what's called PITI (Principle Interest Taxes and Insurance), so if your PITI payment is less than 75-80% of the rent then the deal should cash flow.

Post: Sell or rent out primary residence?

Josh Young
Posted
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
  • Posts 353
  • Votes 394

@Steve Manoa thank you for providing details. If you sell now you will get about $370k tax free, so we should calculate the return you will get on that money (Return on Equity).  The return will be made up of cash flow, principle paydown, tax savings, and appreciation. 

Rent at $6400 minus expenses for vacancy 4%, cap Ex 4%, maintenance/repairs 4%, and property management 8%; you said it's new, rents easily with great tenants and has a maintenance payment built in so let cut this back and say 15% of rent instead of 20%. That means cash flow wise it will lose $250/month, so negative $3k per year.  

Based on some assumptions I made about your mortgage, the principle paydown should be about $2k/month, so $24k per year. 

Tax savings you will be able to deduct the entire payment $5700 minus the principle paydown $2000 plus expenses $950, this equals $4650/month, so $56k plus depreciation (assume 90% improvement value on $1.2M basis /27,5 years) $39k, with rental income of $77k this equals a loss of $18k per year against your income, so lets call that $10k value.

So far we are at $31k on $370k is an 8% return. plus appreciation of maybe 2%, so $24k, that brings us to a total of $55k which is a 15% return. I'd keep it as rental, but only do a 12 month lease at a time because you want to re-calculate in 2 years to see if doing the IRS section 121 exclusion is worth it or not, you really don't have much of a gain, but I'd still want to do the math especially since the rate adjusts at that point too and if you do decide to sell in 2 years you will want it to be vacant when you list it. 

Build up your emergency fund, but DO NOT pay extra towards the principle, you can make a better return and keep your money more liquid by investing in pretty much anything other than additional principle payments.

As far as borrowing money for a rehab just compare rates, unless you are tight on cash flow then consider the HELOC as that will likely be a higher rate, but interest only payments during the draw period.

I hope this helps. Good Luck!

Post: Rental in Tempe (ASU) - Good Idea?

Josh Young
Posted
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
  • Posts 353
  • Votes 394

@Brandon Seider you can actually buy the property as a primary residence as well, so it can be 5% down and lowest available interest rate. This is possible with a program called a family opportunity loan, your lender should know about the program, if not then send me a massage and I'll give the contact info for a lender that I use.

Post: First Time Home Buyer - Looking to get into real estate investing

Josh Young
Posted
  • Rental Property Investor / REALTOR® / Property Manager
  • Gilbert, AZ
  • Posts 353
  • Votes 394

@Ruby Lee

I would put as little money down as possible, save your cash and buy a home in the best area that you can afford.  You will have no trouble renting out the rooms if it's in a great location, and you will have good cash reserves, so it won't be a big deal if you do have any vacancies.  The cash reserves will also give you time to pivot if you need to change strategies and it will give you a head start to buy your next property in a year or two.