All Forum Posts by: Michael Thach

HELOC with you being a co-sponsor or applicant might work ? Or cash-out refi ? You doing flips

for 10% for 6-8months is a good and fair return for him but the cost to get the loan will cut deep. If the lender is asking 1 or 2 points for the setup, this might be a break even case, unless you guys plan to work together for longer. 

 Hi Caren, 

understand the problem here. You can break it down into simple math. 

You owe less than 500k. Means you have about 225k and more equity in it. Property is worth 1.2m means there is about 500k more in equity in it. After you sell it, after all the closing cost you would have technically +600 - 650k. Keep this in mind. 

So if you do MTR and you are netting 3k after mortgage,after management fees, wear and tear and other expenses. This would translate into a return of 36k a year. 36k / 625k equity is = 0.0576. Means 5.76% return. Not bad... the property has chance to appreciate even more and the monthly rates can rise. 

But is this something to brag about ? I think no. 

Is your money working hard ? No. 

Having 625k equity in a 1.2m house, means your money is not working hard. How about owning 2 or 3 properties with 20% down, which would translate into 3 properties value at 800k each. Means you control 2.4m in property value. When they appreciate you make double. You can do MTRs with 3 x 800k properties which would make not much less than a property with 1.2m. 

Is 2.5% interest good ? Yeah is great, but your return is still not amazing. 

Make your money work harder. This is answered on a more capitalistic view, but of course everyone has their comfort zone. 

 Hi Jenny, 

awesome job. Is good to start young. Is good to be ambitious. Is good to have plans and follow them but be open minded.

I think there is a typo or wrong use of term. 
Now you generate 13.2%, I think you meant ROI or Cash on Cash, because Caprate would be unlikely that those properties in the U.S get traded for so cheap. If so someone is doing you a big favor.

" You plan to hold them long long term " Be open to the following idea. Now you generate 13.2% cash on cash. But if your property goes up in value to 400k and you have an extra 100k equity in the property, you cash on cash will technically drop. If it rise to 500k, it will drop even more. So be prepared to have a strategy and plan when in few years this scenario happen. I thought the same way you did, but your strategies will evolve with the understanding of finance. 

You got your first property with an FHA and this is a very strong tool to buy your first property. Build the next plans to continue your next properties.

Be willing not to stay in long-term rental market but use MTRs or STRs to increase cashflow. Don't hesitate to get into new territory , you will learn a lot along the way. The more you learn, the more you know, the more tools you have in your pockets, the more opportunities you see and the higher the returns. Real estate is a wonderful wealth creator. 

Really happy to see young investors entering the game. 

Good job ! Developing for $75/sf is not easy. 

hard to say if it's good or bad if we don't know what the units can be rented out. What is the targeted NOI ? How long does the renovation take ? There is not enough information here.

 Above explaination are correct but quite technically. 

1. If a property makes 12k a month, insurance and taxes are 2k, then you would have 10k left. Out of this 10k your lender is only using 75% to 80% towards your mortgage, in other words you only qualify for 7.5k to 8k mortgage payment, which translate to about 1.1m loan value. bank want to see you downpay at least 20% to 30% in those deals. 

2. Collateral is in most cases only the property itself. 

3. That does not really effect your loan, but this can effect your rents and this can ultimately destroy your investment. But this is rarely the case that someone would change the zoning in a way that it destroys the neighborhood in it's entirety. 

Hi Quan,

yeah is possible. I am in the MTR market with about 30 units. Those returns are very possible. 

You can just pretend to be a guest at Airbnb and check out the area you want to buy. On Airbnb you click different dates and you will see how high the occupancy is, how much the total gross amount is, minus management, minus tax, utilities and airbnb fees and you will see if the amount netting is about what you expect. 

Don't take any one words for it. Do you own research. With internet all research is done within hours. 

You are right about thinking about scaling it up. But I recommend once you are comfortable with single family houses doing airbnb, thinking about multifamily doing airbnb, or at least single family houses converted into 2-4 units and doing airbnb. You want to multiply your returns and not adding one house at the time. x > + . If you want to think really big, go commercial multifamily, double the net operating income and the property value along with it. 

My approach to this is to qualify under DSCR loan as you are doing it right now. Then doing MTRs with the remaining 2 units. Check out the monthly average for MTR, I am pretty sure it will be close to $3500 net after airbnb fees and taxes. When you self manage this, you would be able to live for free inside the property + some extra cash. But you would require to put extra money into furnishing the units and make it tasteful for guest.

All of the above are right. Hard to make positive cashflow with 20% down and high interest. Mortgage payments have risen more compared to rent payments. 

I see that you are referring to Texas. I got couple properties in Houston. They were cash-flowing when I bought them, nothing crazy, about 200-300 usd per month for properties around 150k. I bought them in 2018-2019 and they are worth around +240-300k now, so while they are not cashflow monsters they appreciated nicely, nearly tripled the initial investment amount. 

If you are looking to cash-flow in this high interest enviroment, I recommend you to do MTR ( medium term rentals ) combined with house-hacked. Means you hack a single family house into 3-4 units and rent them out on MTR. It requires more initial capital, more knowledge and the right team. Or you could also find people who does those and invest with them as a silent partner. 

 Hi Jonathan, 

I started with out of state turnkey rentals as well but slowly moved away from it, reason is because is mostly for moderate to good appreciation and low cashflow. It takes you couple years to double your initial investment and then when your long-term tenants are moved out, expect to renovate the property, which usually cuts quite deep into your overall profit. 

My uncle owns 7 properties in the Detroit area but is slowly moving to Las Vegas. The properties he invest in are MTRs which cashflow way better than turnkey long-term rentals and flips. The flips he is invested in generally make him 6-7% per flip which takes around 3-4months. He used a company to do those flips for him, which takes a 30% cut. 

MTRs are doing around 1600-1800 per unit in net cashflow per unit. Is possible to divide a single family house into 5 units. 4plexes units are making around net $2200.

If you need more info dm me.