All Forum Posts by: Mark Murray

Hello again everyone!

I apologize in advance, as I am new to the game of real estate and am trying to get in the mind of matured investors. Hopefully what is below makes sense. 

Curious to whom would rather prefer increased cash flow or a higher ROI. I have been running numbers on a particular property, and since my mind just circles around and around on certain ideas/topics throughout the day, I was curious to who prefers what?

This property would give me an 12% ROI with 10% down. This was calculated with both the 5% vacancy rate & repair cost, taxes, PMI, & Home Ins. However, this will give me about 80.00-85.00 less a month in Cash flow compared to the 20% down with an 8% ROI.

I understand higher ROI means you are making your money work better for you, but everything I have read talks about how cash flow is key. Is it better to do the 20% down with lower ROI and higher cash flow, just to reinvest back into the property for a faster equity build? Or take the higher ROI and 10% down and do something else with the other 10%? Maybe it depends on length of investment?

I assume it depends on the goal of the investor.... 

On another note, in your opinion, what is a good cash flow number?

Thank You!

Mark

@Louise A. & @Heather De La Cruz

Thank You for the replies. 

Much Appreciated!

Nothing worse than looking back at all the years of giving my hard earned money away to landlords. Buying a house is an investment. 

Think of it this way...

Just buying a rental property = 400.00 cash flow + 400 equity each month = 800.00 a month increase in worth. However, you spend 1200.00 a month to rent for yourself. -400.00 increase in worth per month (800-1200 = -400.00). You are losing money!

Buy house of your own = 300 to 600 per month in equity built. 

Add on a investment property when you're ready. Add in the rental totals (800.00) plus 300 to 600 your own equity. That is 1100-1400 increase in wealth per month.

Obviouslythe math is dependent on many factors but, the point is still there I believe.

What I have read and learned from speaking with others, it ultimately comes down to your goals, family life-style and expectations.
70k you could get a 10% down conventional loan through certain banks in your area. Meaning, some banks will let you put 10% down rather the usual 20-25%. I know that in my area I can do this but it is not as cut and dry. I can do 10% down, but need to have six months mortgage payments in reserves, and have enough income/credit to fit the bill.
Sooo... You could buy a 200,000 residence of your own with FHA 3.5% down (7,000) + fees. So round to 12,000 to be safe for closing. That leaves you 58,000 cash! You could now buy that duplex you want for 10% down as you also will have the six months in mortgage payments saved. $240,000 for duplex = 24,000 down + closing costs = est. 30,000. Then you subtract your say 10,000 for your six months. That still leaves you 18,000 in cash on hand. You could use this for renovations or add it up more cash with your cash flow if needed and buy a single family property with 20% down.



The prices could be way cheaper or higher depending on your area. I used these numbers as a good solid example. 

I like this way as I just feel good about having my own house where I can relax and not be around renters. My family would appreciate this as well. 

 I hope that if I am mistaken, I am sure other members will correct me.

Awesome! Maybe so... Thank You for the info. 

Newbie to House Hacking here. Please shed some light into this scenario for me. I thought I had read as a married couple, only ONE person of the partnership has to actually "live" in one of the dwellings for a year.

I brought up this to a realtor recently, one that I have used in the past for non-investment property purchases. Becuase I was interested in a four-plex. I explained that the above scenario was something I would like to partake in; if at all possible. Meaning, either my partner or I alone can house hack this property.

The realtor stated, " You can only do that with single-family homes."

Any response would be greatly appreciated.

Thanks!