All Forum Posts by: Michael Thach

 Let's use an example House in Spring for 190k, if you do it correctly and get a loan as an investment you need 20% down. 

Property 1100 sqft, 3bed 2 bath in Spring Area , is making $1400 in rent

20% down = 38k

Loan Origination, Closing cost = 5k

Loan is 7.8 % ( investment interest is little higher ) out of 152k ( 190-138 ) = $1100 / month ( use mortgage calculator on google to calculate )

Now add insurance 1200 / year

Taxes 3300 / year

Property manager 1200 / year

This is additional $475 per month, bringing you to a total cost of $1575 this is without repair reserves. If you buy single family houses don't expect to make a lot of cash-flow. It will be only couple hundreds. The reason buying SFH is appreciation but this is a patience and longer time-line play. Usually 3-5 years. But each time you will double-triple quadruple your initial principal

Ideal cashflow amount of course is a positive one then the more the better but more means usually also more work. Means you are buying into more problematic areas or condition. If you have a good property manager they can deal with it but also means more turnover, more renovations but if you have the reserves and know what you are getting yourself into, then it's perfectly fine. 

Many investors get into multifamily and rent it out to section 8 tenants. The payments are guaranteed but you can expect that the wear and tear is usually immense. Those tenants don't take care for your property. When you want to sell this property after you build enough equity, you usually need to renovate it to maximize return. This is a possible route for you. 

Or you buy the same and go medium term rentals in other words furnished monthly rentals like airbnb just longer terms. Those make you better cash-flow but it requires a bigger initial investment because you renovate upfront and furnish it.              

 In that case you don't need to worry. 

First you need to make sure that you can add 1300sqft of dwelling because usually most states limits are below 450sqft. Once you know that zoning allows you than you need a general contractor. Just make an agreement with him and pay him for the finish product. In this case if he does something wrong and not according to code he will need to redo it and it will cost you nothing.

Usually he needs to let the walls open so inspector can check the plumbing and electric work. When those are ok, he can close the walls and do the finishing touches. So there is not much to worry about codes being strict or not. Local licensed contractors will know what to do and they usually know the inspectors.

Nice story. Important for you two is not the 10k you made. Because what you learned is more valueable than making 50k on this deal. The mistakes you did on this one would less likely to be repeated on deal number 2 and number 3. The main focus from here is keep doing. 10k are 10k. The experience and knowledge is worth as much as you would continue from here. 

How much return does an investment like this makes ? 

Is 65k with furniture already ?

Tap into your equity with either a Heloc or simple refinance it. However interest rates are not ideally. 

It might not make sense to you but this is my approach. Rent a property, turn your current house into a short term rental or medium term rental. Since your property is already furnished you only need to give it a final touch make it look good. With the short-term or medium term rental income you rent another property. In most cases the Income is higher, so you officially house hacked your own house. If possible hack your home into 3-4 units and maximize the income. 

Buying land, developing the land, get a licensed contractor who is familiar with modular buildings or getting the company itself to attached it to your land is taking a lot of time. Buying land, having the right zoning, having sewer, water and electric connected already and being in the right neighborhood is a big effort and not worth for a small duplex or a 4 plex. You don't need to reinvent the wheel to make a 20-30% return a year. 

Spending 1.5 years to convert your unit is a lot of time. Another way is to work 2 jobs or overtime, save and let a contractor do the work. If it takes you 6 months to save the amount and 2 months for the contractor to build you what you want, then you would have 10months earlier the income. 

Just use Zillow. Pretend to be a renter and check the rents there. 

You can also check on the rental estimate at Zillow and you have a fair idea if the property is cash flowing. 

I got couple properties in Texas but I can tell you with this interest and mortgage landscape it's hard to find a property which will cashflow with 20% down. You need to have another approach in this market. Long-term rentals for cashflow is not the best play. 

I got close to 30 MTRs and building more. I got in by accident because we had to move from STR to MTR because of city regulations and found out that they are doing better than long-term rental since we already have the properties furnished. Later we were building MTRs in blue collar neighborhoods. We were not targeting hospitals or any cooperation.

We are from Vegas and we tried to stay in the center. Infrastructure in Vegas is quite good and everything is at most 40min away. When you are very much in the center it will be 25min in average to everything. 

Our friends, family and other hosts do the same and we are all booked. 

So I would not be to worried. You don't need to target an area just build in ok neighborhoods which are close to everything. 

For expected rates you can check out Airdna

You guys come to Vegas ?

The question here is, how much is the rent, how much is the equity and how much is the mortgage. By answering this 3 question, you might see if holding this property make sense. Many don't sell the " family residence " due to emotional attachment. 

- gather your thoughts and what is important for you two

- go to an business attorney and let him explain you which entity type fits your need

- let him draft an operating agreement and see if this is what you like and revise it if necassary

- ask an CPA and do a conference call between your attorney and CPA and check if both are on the same page and if bookkeeping can be done with that entity form

This is how I structured my 6 entities with family/friends/partners/limited partners/investors ect. 

To save cost and headache I suggest to keep your property and his property out. Keep it as it is. Only the new stuff has to be structured. Otherwise it's a nightmare for attorney and CPA to protect both of you. 

Usually a business attorney cost around $300 / Hour , CPA $150-$300/ hour. A draft of operating agreement cost $500.