All Forum Posts by: Josh Young

Great job on the purchase and rehab, perfect BRRR, Infinite returns on CoC and IRR, the return on equity is what you need to calculate to help you make the decision on hold vs sell.

(Annual principle pay down + annual cash flow + appreciation) / Equity left in the property

Then you need to ask yourself if you sold what would you do with the money and what kind of return would you get. Also consider future rent increases and refinancing..

 These terms sound great, 5% is a better rate than you get anywhere else right now and yes you aren’t getting the principal pay down, but you are getting extra cash flow instead, I’d much rather have cash than equity, equity is usually expensive to turn into cash. Is there a pre-payment penalty? That could limit your ability to pivot if circumstances change, but otherwise 5% interest only sounds like terms I’d take on literally every deal I could buy, if it’s interest only then there is no amortization. Obviously don’t over pay to get those terms.

@Will Greenlee

You could do a rent by the room strategy on your unit and just rent out all the bedrooms and the basement is your bedroom, so you still have access to the kitchen/bathroom/living room. When you are qualifying to buy your next place you won’t be able to use the actual rent that you are collecting for your unit, but you will be able to use 75% of market rent.

@Mary Pastoral

That's a great question, but it really depends on what your goals are, cash flow or appreciation or both. You usually need population growth to get appreciation. You aren't getting a ton of principal pay down on your loan with high interest rates, so that's a factor too, but you can probably refinance in a couple years to a lower rate, so if you can make it work now you have the potential for more upside in the future. The hardest thing is projecting maintenance & repairs and Cap Ex, they very a lot depending on the property, but if you can cover the PITI with less than 75% of rent than you should be able to hold it long term and make money.

Where is rent $650 per month? Average rent nationwide is over $1300 and new listings average asking is $1900.

In California, PA I guess it is actually that low, but the median household income is also $37k, so I guess it’s all relative.

@Nick Moran

One of the biggest advantages of owner occupied financing is the fact that you can put only 5% down on a conventional loan, save your cash, it gives you more options and flexibility/time to pivot when you have cash. I would look for a deal that would cash flow if you put 20% down, but then only put 5% down. In two years when you refinance to a lower rate and take off the PMI it will cash flow then, and you will have enough cash to buy your next property. Good luck!

@Randall Re II

There are a few comps around $180k - $230k, I think $250k is a little high, but you have some cushion in your numbers, a good backup plan could be to BRRR if it's not selling right away, you could turn your gain into long term capital gains if you hold for over a year too.

Hi Arsh, I'm an investor here in Arizona and I can tell you that smaller multi family properties like you are looking for are trading around a 5.5 cap, so DSCR ratios or cash flow over PITI really depends on the financing terms you are getting, obviously seller carry can be great, but those are few and far between. I really like the southeast valley myself, it's were I live and own all my properties, I'm very confident in long term population growth here and there is no shortage of development projects. I'm an investor myself, so I understand the numbers and I'm in the process of becoming a licensed agent, the brokerage I'm going to be representing also handles property management, so we can handle that for you too. I'm going to DM you a property to take a look at. Thanks.

Well said, but I would caution folks to not be speculators, never plan on appreciation or a future drop in rates unless you have a lot of reserves. With that being said, if a deal makes sense in today’s environment pull the trigger, the potential for future upside could be big!

@John Martinez

I would definitely keep it as a rental, that's actually pretty good cash flow relatively speaking, anytime you can cover your PITI with under 75% of rent you should be good to hold long term, and your loan at 2.5% interest is a valuable asset, your principal portion of payments on your amortization schedule are much stronger than they would be on a new loan which might be over 7% interest on an investment property. Buy a new primary residence using a conventional 5% down loan and put a lease on the current house counting 75% of the rent to help qualify if you need. Maybe take out at HELOC on the property before you buy the next, once it's a rental it will be much harder to add leverage.