All Forum Posts by: Michael Needle

Thanks to everyone who offered input, seems like the smart choice here is to save more cash without getting any more leveraged! 

@Greg Scott just curious what it is about DC that you don't like? Just higher returns elsewhere? I'd agree but I spend most of my time overseas for work, so while I'd like to invest in other areas it's hard for me to be able to go build a network and get there quickly I'd something really does go wrong. Also, yes you're correct, SFRs, just using DSCR as a guideline. Thanks for the input!

Would you consider 1.25 as low as one should go? These numbers include 1 months vacancy expense and 1 months maintenance expense, but don’t include capex expense since that just gets added to reserves. I have or am working towards 1 year expenses in reserves for each property.

I think so, because none of these numbers take into account my W-2 salary, currently able to save about 50%, so that could be diverted to covering the RE debt.

I’m just looking for options - in theory with the partners we have we could do a deal now, but if I took out the extra loan it would give us more reserves. We could just wait and save up more cash, but if I have an opportunity to get more cash on hand immediately I think it’s worth considering in case something comes across the plate sooner

Hopefully this is the right thread for this question and thank you in advance.

TL;DR - own a few rentals, DSCR is 1.05, could take out a bigger loan against a property to get more cash for next purchase, DSCR would go to about 0.90 before next purchase is renovated/rented, RE is side gig and job is stable to can put additional W-2 wages to cover RE, want to remain somewhat conservative with potential long term COVID economic fallout, how conservative is too conservative?

Currently own a few rental units. Looking to expand to another property. BRRR or flip and SFR or 4plex, depending on availability and numbers, but preference is 4plex BRRR. Plan is to partner with a few folks for the downpayment/liquidity requirement (planning on a hard money loan).

All properties in the DC market, so rents should not soften too much due to federal government as main employer (one hopes), but I still want to stay on the conservative side given the unknown economic impacts of COVID-19. No non-real estate debt. Currently in temporary housing due to COVID-19.

So, here is the question. My current DSCR is roughly 1.05. I have a property that I could take a loan out against in order to increase the cash on hand for the next deal. My guess is it would drop my DSCR down to about 0.9. It would, of course, improve after the renovation is complete and renters are in it. RE is a side gig, so I could cover some of the payments from my W-2 income. I know it's subjective, but how risky is too risky with this? I'm not so risk adverse that I don't want to buy something in the next 12 months, but I don't want to gamble it all away by being over leveraged.

I’ve noticed in CL that there are quite a few folks who repeatedly post the same ad that drives down everyone else’s postings. Unfortunate but it’s what you get with a free platform.

It’s always difficult renting off peak, but hopefully you can show your prospective tenants that it’s better to sign a longer lease so they get themselves back onto a summer schedule so they have more options at the end of the lease term, too.

@Russell Brazil completely agree on the vacancy, I’m just being conservative.

@Joe Villeneuve those profit numbers for each are appropriate rents minus mortgage principal and interest, property taxes, and in the one case condo fees. Since I plan on only 10 months of rent (1 month vacancy, 1 month towards repairs) I get to 7,200 and 12,100 annually.

As far as greed, of course I want to build wealth and make money, and the obvious choice is do the flip and then buy again, but the real question is, is getting “stuck” with the asset that will appreciate less (in dollar terms) worth the risk of not finding as good of a bigger deal in the future. I certainly want to make money, but I want to make the best possible decisions along the way.

@Marco G. so my fear of being stuck with the condo is that I then can’t immediately follow up and buy the row house, if I buy the row house and it drops 10% for a period of time I still have renters paying down the mortgage. With the numbers I’m using even the rent could drop by 10% and I would still be at break even. It’s missing out on the rowhouse that is my greater fear.

With all that any more thoughts/responses would be great, thanks again!

As background, I own 5 rental condo units (in the DC area). Till now I've been more interested in cash flow but understand the power of having equity to tap. My goal has been to move towards rowhomes/SFR to eliminate the HOA expense, but have a potential opportunity that could be worthwhile. I plan to put in 100k cash either way, to include closing costs (so around 80,000 for a downpayment).

Rowhome: Purchase price and repairs will be around 850k and the repairs would bring it to rental standard (it's already livable) but likely wouldn't give more than 25k in immediate equity. It's a 2 unit (top unit and basement). Factoring rent at 10 month (1 month goes to maintenance, 1 month to vacancy) the return is around 600/month or 7.2% annually.

Condo: This would be a gut job. Purchase price is around 220k, looking at 45k in repairs. It would likely be easily sold for 400k based on location. With the same rental factors as above, profit would likely be around 1,200/month or 12.1% annually.

I'm torn as in theory I could do the condo, flip it, then be sitting with 225k after the sale to go back out and buy a similar rowhome. However, anything can happen in the meantime and I could be stuck holding the condo for several years. While this isn't the worst outcome given the potential CoC return, the potential equity returns in the long term by just buying the rowhome gives me pause about being "greedy."

Anyone been in a relatively similar situation? Thoughts? Thank you!

I've haven't yet run into this issue with my properties until now, and am curious about people's experiences. I have a 2BR property in Virginia and am considering renting the unit to 2 individuals who are currently roommates. One person is extremely qualified, the other is less qualified (lower credit than renter 1, but still not horrible, income wouldn't qualify on her own).

Should/can I only sign a lease with the more qualified tenant and then allow her to sublease a room to the roommate? I feel like that might make either of them less likely to sign a lease. My assumption is they are both 100% liable for the lease if they both sign it, so if one of them is qualified that should be enough to ally any worry? Thoughts on the best way forward with this? Thanks!