All Forum Posts by: Logan J.

That's good to hear. I think I may only be holding for 3-5 years so If I can get a property in the South Town / Pearl area, It might be ideal. However, I don't know the market for tenants is in that area. I know that I could find students from UTSA if I bought a place closer to 1604 and i10.  

I've done some rough math and assuming I can bring in ~500 per room, I can't really spend more than 165K on a home to cash flow. I don't think I could buy a home in the Pearl or Southtown area for less unless I am looking at the wrong zip codes. 

 Hey Brian! 

I didn't list specifically because I didn't think there were many people from San Antonio on here. I am mainly looking at the i10 and 281 corridor north of downtown. I cant decide if I want to live more centrally or closer to downtown. Work and school are both off of 1604 but I like living closer to area like South town and the Pearl. 

That's good to hear about new vs. older homes. I mean I am leaning towards a newer home but genuinely appreciate the character an older home provides. I'm currently living in a renovated house in the Woodlawn lake area and love it. However, in my personal purchase I might lean towards a newer home because I feel there is less risk involved there.

With the hail storm last year, do you think most homes should have new roofs? 

Evening everyone, 

In May I plan on purchasing my home. I plan on it being a SFH and having it be my primary residence. Any additional rooms I have I will most likely rent out.

With that idea in mind, I am more inclined to purchase a larger house with more bedrooms or bathrooms. However in San Antonio, there doesn't seem to be many 4 bedroom 2 bathrooms available so options are limited and in most cases are expensive as well. 

My question is, is there a trade off between the two? I realize I would have to manage more tenants/ roommates but other than that, economies of scale tells me I could get a better return from a house with more bedrooms. 

Aside from that, are there any other qualities I should look for in a house other than personal preferences?

Thanks,

Logan

@Kyle Handy

Thanks for bringing that up. If can get a 5 or 7 year ARM I might take advantage of that. If the cost of selling are offset by the lower rate, it might be worth it.

I've kinda worked through the math/logic and want to run it by you. 

Constants: Buy a house for 165K with 5% down. Closing cost on the sale of the home is 9.95% (Sales tax at 8.25% plus the 1.7% commission for the broker/agent. Please correct me if I'm wrong in this assumption. Also, if I plan on doing a 1031 exchange do I still have to pay sales tax?). I assume the property appreciates at 3% per year.   

Variables: Fixed 4% Interest Rate vs. 5 year ARM.

At the end of 5 years (60 months), the home value is $191,280. Selling the home would cost me $20,191. If I divide the closing cost over 60 months that equates to $317 per month. 

Take a step back. If my plan was to take on a 5 year ARM and sell at the point were the rate is no longer better than the 4% conventional 30 year fixed, the 5 year ARM rate would have to decrease my total monthly payment by ~$317 per month to be worth it.

This assumes my plan to sell at the end of the end of advantageous rate from the ARM. On the other side, If I go fixed, I can by default buy and hold and spread out the cost of selling and have a PM take over.

Just doing some rough math I see that at 4% (from a fixed rate) my monthly payment is $748. Drop that to 3% (assumption for 5 year ARM rate) and I have a monthly payment of $660 and furthermore, drop it to 2% and the monthly payment becomes $579. All of which don't come close enough to the difference of $317 they need to be.

Any additional insight would be helpful. I don't know how ARM rates compare to fixed and could use some help there. Thanks!

 What is your opinion on lenders credits? Lets say I purchase a house valued at 165K and get a 1% lender credit for closing costs, so $1,650. However, I take on a higher interest rate because of the lender credit, lets say 4.25%. The monthly difference in the interest rate is ~22$ per month. Divide the $1,650 by the $22 and you get a break even at 6 years. If I sell the home before 6 years, it was advantageous to take on the lender credit, however, if I do not take on the lender credit my initial investment is higher. 

I'm hesitant to get a lender credit and just wanted to hear/read your thoughts. 

 In my calculations I haven't included mortgage reduction and taxes, which as-is, still beats the market average. If you include those two things, I could see it easily having the returns your are quoting. 

Yup, I love mint, I've probably been using it for the last 4 years and I recently just got on YNAB as well. I use side-by-side. YNAB is great for catching accounts that don't sync or can't be synced to Mint. 

Oh I completely agree but I guess that's why I am here, too see if this is something I want to venture into. Thank you for all of the advice. I'll be looking at putting together a personal net worth statement. I honestly had no idea that was even a thing, most of the people I am around are more concerned about budgeting and probably couldn't fathom writing a personal net worth statement. 

Haha yeah you nailed it on the head, my guilt and fear is most likely derived from the idea of being poor.  I'm just taking one step ahead of the next and honestly I need to ditch the fear and conflict I am having to continue to move forward. Again, thank you for all of the advice. 

"Develop very specific short-term (3 yr) and long-term (7 yr) investment goals. This will provide you direction, including help answer this question..."

Now that you mention it, I don't think I've every developed investment goals. I have only every set career goals for myself. The only finance related goals I have ever set were to save as much money as I can. Last three years I have maxed my 401K, IRA, and HSA, which was more than 50% of my income, all while living comfortably. Any suggestions? I believe I am at the fork in the road between riding my 401K and getting into RE.

"You should be now focused on minimizing your living expenses and maximizing your savings. Savings will become $ that will be invested and begin working for you. You should be maximizing your investable dollars." 

Heard. If wasn't heavily investing in my 401K, HSA, and IRA, per month, I could be pocketing ~2K. The fraction that I actually get in my paycheck is what I've conditioned myself to live off of and I'm pretty happy with the lifestyle I have. With that said though, I still have a substantial cash reserve of ~17K (including my emergency fund). I'm just conflicted on what do with the fact that I make more money than I know what to do with it because I've developed a guilt towards spending money lavishly. That's all besides the point.

1. Put the minimum in your 401k that will be matched by your employer.

I'm still conflicted with this since I have enough cash on hand to purchase my first property right now. I think what I will do is still contribute to my 401K as I am and if RE seems to be something I want to get into, then I will shift my investment priorities.

2. Minimize your living expenses however possible.

Check and done.

3. Invest the money wherever you can maximize your cash flow and return, whether that is in state or out of state.

This is probably why I am looking into real estate, to maximize my cash flow and return. San Antonio seems like a good place to start. 

4. Don't be in a rush to own your own home. It doesn't make financial sense for you now. Buy a house when your family dictates (kids) that you should and make it a house that is reasonable and significantly within your financial means.

My plans are, if I don't plan on buying multiple properties or don't have the cash to purchase a home I want for myself is to do a 1031 exchange. 

I'm generating over 20% returns annually, so prior to leaving corporate America, I cash out all my retirement accounts and invested it in real estate, I can pay the tax in two years by investing, so a no brained. Realize that finance companies (Schwab etc) use the "tax issue" as a carrot to keep your money and generate fees off if it.

20% returns is pretty amazing. What do you mean you can pat the tax in two years by investing? What tax? I am privy with investment banks like Shwab and how to investing in their funds. I've always had the Bogglehead mindset and that is no invest in low-cost index funds and skip the gimmicks. It's worked well for me so far but I've never touched 20% returns.

Thanks for the advice. I was looking for neighborhoods off of 281 and i10 north of 410 and off of the 1604 loop between i10 and 281. Work is located at 281 and 1604 and obviously UTSA is a stretch down 1604 so for my convenience this makes the most sense. 

I was planning on having roommates/ tenants but it seems like with rents being so low, I might have to pay rent towards my mortgage as well because unless I buy an extremely cheap house at ~130K and take in rents of 450-550 per tenants. These are all rough numbers from the model I've built.  

If your interested in looking at the model I've built, here is the link. There is a lot going on so I have included notes on how to use it. 

I'll talk with my mortgage broker and see what I might qualify for, the less money I have to put down, the better. Thanks for the advice. 

If you are interested, here is a more complete version of the model I built. Link.

Yes, I actually contacted a mortgage broker probably 6 months ago when I was interested in rates. I'll call him again to touch base and see what I might qualify for at this time. 

At the moment, I plan on doing what's "normal" for my generation. I plan on living with friends. I've been doing it for the last two years and it has seemed to work out well. I have a good gauge for how my friends manage their finances. If I need to advertise and find a tenant externally I feel like I am capable of doing that too. 

To a certain extent I feel like I am resourceful. I can fix minor things here and there, do maintenance, and can learn as I go through trial.

A colleague of mine mentioned that consulting is one of the best things I can do for my career. I'm only a few years into my career but once I finish my masters I plan on looking for a consulting gig. Houston and Dallas seem like great areas but I'd more-so prefer to stay in San Antonio if not Austin. 

Hha yeah... Dallas is probably the furthest major city from San Antonio. The 5 hour drive is not an easy one either.