All Forum Posts by: Krystof Pilisiewicz

Best of luck! This is the place to be.

My 2 cents would be: try to educate yourself about the topic, and get your finances optimized for a loan. That`s how we all start.

Again, good luck!

Hi @,

Thanks for the note. I will start putting 5% as a loan rate in my calculations and see how this effects everything.

Kris

I would agree with those posts. 6 family units are not the easiest when comes to price increase. I think above 4-familiy house the issue arise. It`s a long process. But who said that things might be easy?

Thanks @Jim Adrian. That is good advice!

@ Ronald Perich,

I was planning to live there for now and get an FHA loan. I think in markets like NYC or SF it`s hard to get cash flow right from the start and that phase might take some time. However, the place I'm interested in has a new roof, heating system, sidings, windows, appliances. I need to finish the basement so I can rent it out, but I think that is it as far as fixes and renovations.

The thing about markets like NYC is that the properties go up in value very fast. Last year my other property went up by 12%. Prediction for this year is 6%, but I think it might be higher. Regardless even if I lose some money and have to put 300$-500$ a month, when I sell it the house after 2 years I will make a good chunk of money. It seems a majority of people are fixed on cash flow, but that is just one aspect of making money in RE.

Thanks for your feedback, Greatly appreciated it!

@ Diane G.,

Aha! So those 1%- 2% rules not always make sense. and pretty much any rule to that fact. You need to know the market and use a common sense based on a mixture of experience, knowledge (books, BP) and some luck. SO because I don`t want to put 10% on vacancy doesn`t mean this is a terrible deal.

What @Tim Vecchioni said, 5%, make more sense to me.

Tim, to add to your comment about 'that means they can't afford to buy or there is a reason they aren't buying' I would try not judge people because many factors come into play why they act in a certain way. I have tenants that between a wife and a husband they make $140K per year. The husband doesn`t have a checking account, yet he makes 80K per year. He pays cash every month to me. It doesn`t make sense to me why he doesn`t have a checking account, but who am I to judge him?

Some people don`t realize they can do things, like buying a house and if you live in an area with houses for sale for 800K-1 million for a 2 family house I can`t judge them. It can be a scary thought.

Hi @,

Thanks for your reply.

Why do you think a family is a bad idea for tenants? I think just the opposite. I think a family will stay longer, and if you do a proper screening, you can find a great family that will remain years in your property paying rent on time.

@Jeff Filali

Why do you think this deal is terrible? Can you give me some rational behind your thinking?

I noticed that people mostly say that I should go with 10% CapEx or Vacancy. I'm not sure if I agree with this, but now I know that 2% was too low.
Here is my thinking: If I`m planning to collect rent around $5,300 a month and go with 10% for CapEx that would mean I would have to put away $6,360 per year on this type of expense. I don`t know what would cost so much money on a yearly basis for a 2-family house? Some examples: a hot water boiler cost $800 (it last for about 10 years) A new roof can be replaced for 4K-5K, and it can last for 20 years. Would I be changing windows each year ($250 per window with installation) in the entire house? And what if the house was just built?

To demonstrate that going by % numbers, might not always work, let me give you an example:
-I own a house that is worth $850K. I pay $5,300 in yearly taxes. That is way below 1% of the value of the home. Do others pay way below 1% for their taxes as well? My house insurance is 1,300 a year for a home that is worth so much? Where is the logic behind %?

If we go with the reasoning that all houses in all the markets should use the same % rule, why they cost differently, and what is the point of buying anything in NYC or SF?

I would love to hear your opinion.

Cheers!

@

Thanks so much for you advise. I will take all those advices into consideration. I might be naïve at this point, but I`m glad I can get advice from someone like you.

Rock on!

Kris

Hi @John Leavelle,

A couple of questions for you:

- If I go with 10% for CapEx and Vacancy that would mean that nearly after 10 months I would expect someone to move out. I think we can minimize this by renting the place to a family, rather than an unmarried couple. I mean you can try to do things to reduce this aspect. As far as CapEx if you buy property in good shape, meaning new or right after the renovation that could be minimized as well. I think my assumption 2% is too small (and thanks, everyone to point this out for me) but 10% it might be too high. Regardless, the point is taken!

Also, I think a lot depends on the market, so we need to consider this too. If I go with the 1% rules, that means I would never buy anything in NYC or high priced markets. Does this mean I should not look into this market? I think I have to bend the rule a bit, take some risk and see how I can make this work.

I love your idea that I need to put aside some money for PM. I mentioned that I want to do the work myself, but the idea is that eventually, someone else will be doing this.

For the loan numbers, I was thinking to get FHA with 10% downpayment. When I spoke with my banker, she said the rates are: 3.5% mortgage + 1% loan insurance till you reach that 20% pay off for the house. Eventually, I would take out a conventional loan so I can use an FHA to buy another property

I`m just starting on this adventure, but it seems you are very knowledgeable. I truly appreciate your reply.

Kris

Hi @Matthew Gangi,

Thanks a lot! Let me revise those numbers and see what I get.

Kris