All Forum Posts by: Michael Costanzo

@Thomas S. 

If this property that has a buffer of 600 dollars and then refinanced in a few years to get rid of 300 PMI and then have a rent to mortgage buffer of $900 (without raising rents) without accounting for maintenance and vacancies and cap ex is a poor investment, what would constitute a good investment? I get that cash flow is a huge part of the analysis but why can't we ever look at principle pay down, tax advantages, and appreciation and factor that into the decision? I get that you do not want rely on those but if the property breaks even or cash flows a little bit I am confused as to why that is worse than renting? It completely ignores books and investment strategies that even advocate for a small period of time floating the property until its profitable. Again, i am not trying to antagonize just really trying to understand the numbers.

@Samuel DeMass  I really appreciate the thought out response. Just to touch on a few things you mentioned. My total all in cost of 2100 per month includes the p&i, insurance, and taxes of 3500 per year. The other figure I used to say before taxes I meant income taxes (although I know there are ways to pay less income tax with real estate). So the buffer is 600 per month before accounting for maintenance and vacancies at 250 per unit per month. 

This is the hottest area of my city, new residential buildings are going up, renovating old warehouses and industrial parks with urban apartments. Building cool mixed use retail buildings, new restaurants etc. It is less than 1 mile from the heart of downtown which is exploding 

I am a newbie to the investing world. I have read many books on the topics, talked to many brokers, etc. My specialty is in real estate insurance so I know a little bit, but from a different angle. The holy grail that I see held up on this site is cash flow. My question is a bit nuanced. 

I am looking into house hacking. The problem is my market does not allow for that when investing for the type of returns I hear about on this site and podcast. When I read books like "Investing in Duplexes, Triplexes, & Quads by Larry Loftis or Buy and Hold by Schumaker they tend to hold different philosophies about long term investing in real estate. I am not in it to cash flow 87654% a year and quit my job tomorrow. So lets get down to hard numbers. Looking at a duplex in a very hot emerging market. Here are the stats

Purchase price 340,000

Each unit has 2 beds and 2 baths

Units rent for 1350 per unit- has been fully occupied for the past two years (I would be the other tenant)

Financed with an FHA Loan - all in mortgage and insurance payment of $2100.00

Constructed in 2008 with literally nothing left to do on the property- it is in phenomenal shape.

Tenants pay all their own utilities- this property was built to be rented. 

Even if I put away $250.00 per unit per month for vacancy, repairs, maintenance, cap ex, at the end of the year we have $1200.00 left. With an 11k dollar investment that is over a 10% return. This property carries a high monthly mortgage insurance of 230ish dollars which when we refi the property 3-4 years from now will drop off and we will be looking at $4k a year from this property before taxes without raising rents etc (they are rising around $25 per year for the last 3 years). 

Thanks for bearing with me on this but I am trying to see the downside to this. Its either do this deal or rent for 1450 per month. Sure this isnt cash flow city but it gets me started and has to be a step better than purely renting until i find some unicorn deal. 

Please pick this apart! I want to know what I am missing. 

And downhill in that context was meant to be a positive :) 

Sarah - that is all great advice. I will keep that in mind as I continue my search! As always, the market will turn again but I feel like if you can make it as an investor in a sellers market it is all downhill from there. 

David, that is exactly the questions that I am bouncing around in my head. I have lived in Richmond my entire life and know all the areas inside and out so I am comfortable investing here if its the right deal but even SFH are in 150-250k range for a 3 bedroom unless you buy a completely rundown gut job and even those get scooped up really quickly.

I am a new investor in the Richmond, Virginia area and had a few questions for the experienced investors out there. I see a lot of posts on the forums and from other on BP saying in their market anything from SFH to Duplex's and even Quads go from the 60k-200k range. In my market a small 3 bed 1.5 bath starter home in "decent" shape in a "decent" area starts at 150k. Duplex's are in the 300k range and quads in the 400 - 500k range. With that said the rents are a little higher, but how can a new investor find good deals in their area? I feel like I am missing a big piece of the puzzle when it comes to finding deals below market value and even off market.

Thanks everyone for all of the input.  I checked out meetup.com and found several Real Estate Groups in Richmond. Outside of the CVAA and RAOA does anyone know of other organizations in Richmond that would be beneficial to attend?

@Trevor Ewen

Hey Trevor, that's great to hear! Richmond is growing by leaps and bounds it feels like. Also, great post on the Blog - The Creative Way to Gauge Whether You Can Afford Your Rental's Worst Case Scenario!

Hey @Molly B., it looks like we have very similar aspirations. I also graduated from VA Tech 5 years ago with a political science degree. I know of a few multi-family associations like the RAOA and CVAA but I am always looking for other places to frequent. Let me know if you come across any others you think are valuable.

Also, would love to learn more about due diligences in multi-family investments sometime!