All Forum Posts by: Lionel Li

Yeah that $42/mo increase is just from you bridging the gap and getting a lesser mortgage because of a lower appraisal, you're essentially paying yourself for overpaying. This is where I'm against the turnkey model, almost a 4 year timeframe to recoup your premium and that's just to break-even. If the appraisal is off by about 10%, could the rental rate or reserve figures be off too because that would just prolong your time to break-even and to see a return. 

My own rule is, I should be in the positive from day one, after purchase price/rehab/closing cost. If I'm not, it means I've spent for more than it's worth. The turnkey model has a smaller equity buffer, understood because they take the work out for you..but you need to run your own numbers prior to submitting any offer to these TK providers. Even with a 3k loss, I'd pay the piper for this "dream shaped rental"..you can make it back from somewhere else and not have to hope and pray you'll break-even in 4 years or more.

You're on the right track but you may need to pivot away from this one, hope it works out for you.

If push comes to shove and my tenants are experiencing hardship from this superbug then yes I would work with my long-term tenants.

Exactly what @Bill F. mentioned, I would probably use a temporary billing arrangement similar to vendor terms. Something like a 2/10 net 30, tenants can opt to either receive a 2% discount for paying within 10 days or pay the net in 30 days (terms may be changed). This is not only to extend the payment period but to incentivize early payment. This doesn't mean the tenant can be behind by months and not pay, this is a collaborative move between landlord and tenant with mutual understanding that this virus is an issue that could affect us all.

Wondering if the SFR vs MFR debate will shift, now that economy of scale may not outweigh tenant's sentiment of living in close proximity to others lol.

Joking aside, not sure what to make of the current events. There's so many variables with the new issues of Saudi-Russia oil war, COVID-19, low interest rates + the existing issues of housing affordability, U.S. Consumer Debt Crisis. I'm still playing it by ear and investing in the (2) properties I have under contract also to stay a bit more liquid and happy I went with single family homes that have sturdy fences for my tenants to ward off this superbug.

It means cost of borrowing overall should be trending down. Doesn't always directly reflect to the 15/30 yr fixed mortgages though since that's based on the 10/30 treasury yields and demand of new mortgages/refinances etc. 

Overall, lower interest rate means less interest expense for everyone, more money leftover means increased consumption, lesser yield rate for bank accounts, less of a reason to keep your money in the bank which means more money flowed to the market and investments, but higher inflation bad for savers but good for assets because more appreciation and capital gains. 

They're hoping to stimulate the economy and restore confidence because rates influence consumer and business confidence, at least that's what I think they're trying to do, let's see if it's enough to counter what's been going on.

Hey, first thing I noticed was you're calculating on 15% down. The question is, do you really have a lender that will go around the usual 25% down for a 30yr fixed single family investment property? Second thing is the $2,500 repair budget, and you mentioned this would potentially be your first property..repairs come up above what you expect MOST of the time and $2,500 won't get you much unless you plan to do everything yourself. Hedge that risk by increasing your rehab budget.

Lastly comes the monthly activity, 18% (6%/6%/6%) for reserves isn't as bad as I see other people account for it. However, I always calculate with 30% (10% each), you'll never complain that you've set aside too much for reserves. Property taxes and Insurance should be real time quotes or as close as it can be. I'm not sure about TN but if the taxes truly is $950/yr as non-owner occupied then that's amazing. Don't fall victim like a lot of people who use owner occupant taxes to calculate and gets crushed the next year when the bill comes back 50% higher.

Hope the numbers still work after everything and you're able to secure your first deal!

Hey @Lance Robinson, awesome performance on those properties! It's good practice to review how the investments have been performing and your 5 year analysis on turnkey is a great way to measure. I've been investing in the Indy market for about 2.5 years with (5) non-TK single family rentals (#6 under contract atm) and I've been fortunate to reap the benefits of a rising market (appreciation + increasing rental rates) even in such a small time frame but I wish I started sooner. It shows that if the numbers make sense the best time to get started is today no matter which vehicle you choose.

Continued success to you and keep the updates coming, love this kind of content!

May not be the best use of capital from a gross-return standpoint, that's only 3.9% of ARV annually and not yet taking into account PITI, utilities or reserves. Don't get me wrong, this is a successful appreciation play for sure but in terms of holding this long-term, there are better rates of return on your capital in other investments.

If you're trying to build cashflow, then this is a great way to shift capital made from appreciation to buy more income producing assets. If you're not itching for cashflow and you can bleed a little every month to hold your capital gains, then by all means keep it growing! 

Great stuff nonetheless!

So far I've acquired all of my rentals in the Far Eastside. Of course, you'll have to find the market that's right for you. Yeah, there's a system that I have for acquiring, managing, renovating etc.,the first deal was found via MLS through my agent and I have none of my own capital in that deal after a successful first BRRR.

Understood, it's definitely different when you have other family member's living situations to think about. It's good that you're thinking of ways to do both, hopefully you'll land something in the coming months. It definitely got a lot easier these couple of months in the NYC market with no insane outbids.

Hey Faysal 

Your story resonates with me, I definitely had the same struggle of deciding what to do in late 2017, househack in NYC or buy traditional rentals in general. While I waited I did the opposite and stuck nearly all of my capital into equities with close to the same balance as you, I used the broad index as my saving account which paid off quite a bit.

Househacking in NYC or even parts of NJ was a struggle for me because I couldn't find a deal that I was really satisfied with. OR, I'd find a deal and calculate it but it would push my DTI so high that it might put me on the investing sidelines for the next few years. I'm sure I don't need to explain to you the FHA self sustaining test for 3-4 units either. What I ultimately decided to do was to go out of NYC to Indianapolis, not as close as @Scott Wolf in Dutchess County but similar methods/systems that you'll need if you're to invest out of your own market.

A little over 2 years later, I have 5 rentals out of state, and hopefully #6 that's pending will have no issues to close and I'm closing on my co-op in Queens (all at the same time). I see that you're a real estate agent in NY, now before you crucify me for doing that, it can be sublet immediately after purchase and the maintenance is approx. $500/mo and valued around 300k in a decent neighborhood with the most lenient board I've ever seen. 

With a total PITI & utility cost of approx. $1,600/mo to have my own space in NYC and the ability to lease out the apartment, I definitely don't have any regrets since that has more than doubled my net worth in the past 28 months from buying rental real estate in Indy and substantially increased my income. I understand it's not a 'one size fits all' approach, it's just to give you another perspective on other possibilities while you decide whether to househack or not. However, I do think taking action sooner pays off more than to find the perfect situation sometimes.

Good luck and can't wait to see which route you pick!

I wanted to just walk away from my career in 2017 as well when I was 27 because I was fed up with my role and wanted to do the full-time real estate investor gig, full bore. I'm glad I didn't because that W2 gave me the confidence to make some smart investments that also spring-boarded me to get a handful of rentals in your market. Not only that, I decided 3 month ago to change careers and now I've increased my income by almost 40% and I'm enjoying my role a lot more.

I'd like to think that I'm paving a way to eventually give myself the option to leave my job if I wanted to. But until my $/hr from my investments exceed that of the total comp from my W2, I'll probably stick to this job while continuing to invest because it definitely helps my DTI for lenders, savings rate to invest the excess.

There's definitely something to be said about moonlighting the investment/agent gig before going all-in.

Much success to you in Indy!