All Forum Posts by: Jordan Holt

Greetings,

My wife and I are planning on relocating to the Raleigh area from Syracuse, NY in May/June. We are trying to decide if we should sell our current home or rent it out. (3Bd, 1 Ba)

Selling: We purchased the home last June. The current balance on the loan is $51,000. The realtor thinks we could sell for ~$57,000. Thus we would probably break about even...maybe a thousand or two up or down.

Renting: The property manager thinks we could rent it out for ~$950. The escrow payment will be around $600. Tenant to pay utilities, water, and handle all snow removal and yard upkeep. The property management fee is 10% plus $500 for each new tenant. With about $50 / month in general upkeep that would put us pocketing around $200 each month. However, the hot water heater will probably go in the next year or two and the roof has maybe 3-5 years left.

Any advice is appreciated. Thanks.

@Greg B. Thanks for your words of encouragement. I will say I've been very tempted on a SF this last week as I know my wife and I would be very happy living in the property, however, I know logically it makes a lot more sense to start with the multi-units. I will hold off from the SF a little while longer and try to find a smart multi.

@Jacob Ehrgott I'm a little bit familiar with the Auburn area (I grew up in Baldwinsville and I remember having many sporting events in the area). The FHA program definitely seems to be a great way to get your foot in the door. Especially with multi-units, it seems that first year or two of owner occupancy you can learn a lot about landlording, and getting a good practical sense of ongoing costs. Are your Auburn properties SF or multi's?

@Jerry W. Thank you for your very insightful post. I can read years of experience and wisdom in your words and I take them to heart. As far as the partnering you suggest, I worry that I don't have much to bring to the table. After this first purchase I will not have much cash and my knowledge will be limited. I will have energy and an eagerness to learn, although I feel as though that is a common trait among all who start an endeavor (including many of whom don't reach the summit). My only real practical skill I can offer is a few years of painting experience (although a couple years out of practice) and light repair work. I will certainly keep my eyes open to the possibility, but I'm not currently counting on it. Thanks again and I hope to someday to mirror your success.

Hello Everyone,

My name is Jordan Holt and I was born and raised in the Syracuse area. I'm in my late 20's and my wife and I are looking to purchase our first dwelling for ourselves and children.

I have gone on real estate learning binges 2 or 3 times in the past (attended a Rich Dad Poor Dad weekend seminar years ago) and even put in an offer on a 4-plex in Oswego, NY about 6 years ago. Each time I return to real estate I see the inexperience I exhibited the time before and this time I feel much more prepared and level-headed.

As I mentioned, my wife and I are looking to stop renting and purchase our first property sometime soon (we've already been to a handful of properties with our agent). We are currently looking at SF and multiple family homes. Additionally, we are trying to balance our different tastes. Her focus is on finding a decent place for the children, while I am more focused on getting the snowball rolling. Part of the fun of marriage I suppose :) .

Going forward, I would like to be able to make some side income (to start, as our funds are currently pretty limited) with real estate while we save for the next property. After perusing many of the wonderful articles / posts / blogs on the site it seems as though wholesaling might be a good direction, however I will admit to feeling a bit apprehensive about it (most likely out of not fully understanding it and being burned a bit in the past). I am pretty much open to most ideas at the moment.

So that's a bit about me. Thanks for taking the time to read it and I hope to see you all around the site!

Another area I touched on in the OP, the 50% rule. So far in my estimates I've been using the 50% rule as well as a breakdown of what I think the expenses will actually be. Pretty consistently there is a considerable difference with the 50% rule looking like the rosy picture.

Am I correct in assuming that in this area I will need to change this rule (to maybe the 60-65% rule) to account for these higher taxes (~$3,600 a year for a $70k assessed property) or am I somehow being a worry wart and overestimating things? Instinctively I want to say to adjust the rule, but it is generally referred to as a conservative estimate to begin with and I'm talking a drastic change to it. Thanks.

Thanks for your response Jim. Your response intrigued me and I just made a spreadsheet to calculate the relationship between purchase price vs different tax rates given the same monthly payment. A couple things I see:

- With a 3.5% down payment, 4.25% - 30yr loan. Comparing a 5% tax area vs a 1.5% tax area allows you to pay 48.6% more for the purchase price to maintain the same monthly payment. Some others: 5% vs 2% = ~39% more; 5% vs 3% = ~23% more; 5% vs 1% = 59.7% more.

Other interesting changes at the original setup (holding everything else equal: Changing to a 20% down payment increases the percentage to 56.25%. Only increasing the interest rate to 5.25% reduces the percentage to 44.3%. Also, only decreasing the term to 15 years decreases the percentage to 34.3%.

Now a higher purchase price means higher down payment, means lower cash on cash return given the same NOI. However, it seems like for at least a buy and hold strategy you'd be better off in the long run paying more for the loan and less for the taxes, as you'd be building more equity and once the loan is completely gone you're ahead month to month.

Again, I am new to the practical side of real estate investing, however to me it would seem that there is a significant disadvantage to investing in this area, if in fact other areas have much lower tax rates (I have only lived here in central NY so I don't know if other places charge their taxes in a different form that I'm not capturing with this model). I am in no way trying to offend anyone with any of this and am just trying to make sure I start my family off on the best possible foot. If anyone would like to give me their two cents or clue me into something I've missed I would greatly appreciate it, as well as any advice in general for a young (28) man eager to make a start. Thanks.

Hello Everyone,

My name is Jordan and I had a question about property taxes...first a little background. My wife and I are looking to enter the real estate investment field through an FHA loan. We have ~$6k in cash with some family offering a little help if needed. We were both raised in the central NY region and have lived here all our adult lives. Ideally we're looking for a multifamily property (where we'd live for a year) or find a great deal on a single family we could sell / refinance with a nice chunk of equity in 3-5 years.

My main question has to do with property taxes. I have read many blogs and books...including this site....where property taxes are normally estimated around 1-2% of property value per year. I believe this estimate is assumed in the 50% rule as well. We have been looking at properties for a few weeks now and have noticed that our property tax rates seem to be much higher than these estimates. For instance, for almost all areas within 15-20 miles of Syracuse:

Areas with no Village Tax:

Town & County -1.27% + ~$560

School - 2.93%

Total - 4.19% + ~$560 per unit

Areas with Village Tax:

Town & County - 0.78% + $390 per unit

School - 2.57%

Village - 1.22 %

Total - 4.57% + $390 per unit

As you can see the effective tax rate in the area is closer to the high 4, low 5 % range. So first...when people estimate their taxes at 1% are they including all the taxes I included above? Second, if taxes in this area are in fact 3-4 times higher than what is normal, should my wife and I seriously consider moving if we wish to develop a thriving portfolio over the long term? (Currently there is not too much keeping us here...family is the main thing....my wife stays at homes with the kids and I am currently overqualified in a clerk position for an investment bank earning low 30's). Purchase prices tend to be a bit lower in this area, however, in my spreadsheet it seems - cash flow wise - the higher tax rates more than offset the lower mortgage payments. Any insight into this matter would be greatly appreciated. Thanks for your time.