All Forum Posts by: Michinori Kaneko

Thanks George

@Dan H. you're contradicting yourself. how do you know San Diego isn't going to be like Detroit? Detroit was doing pretty well too, you know.  How do you know there won't be a downturn in the real estate market near term and there will be drop in value.  Sure, maybe you outperformed and did well before, that doesn't mean it will continue to do so, and it doesn't mean where you will invest will not explode.  

You have $200K equity and and even if you $50K closing cost that $150K which you WILL DEFINITELY find a property that cashflows more than $600 a month. YES, I'm pretty comfortable saying that as long as you don't blindly invest in a terrible property you can beat $600 cashflow any day.  Maybe you invest in SD so you are biased. If you want to play the appreciation game, why dont you invest in San Fran or NY instead? I bet you their appreciation beats San Diego for sure.  My primary resident in NY has appreciated by 60% in past 4 years. Yeah if he wants to play the appreciation game, i think he should definitely sell the property and invest in NY. 

Like I said, if he really thinks San Diego property is going to keep going up, he can cash refi and use that to invest elsewhere.  until you pull out equity and realize it, that number is only on paper and doesn't mean anything.  more and more principal payments you make, less and less tax credits you get from interest expense. Always better to keep refinancing, take cash out, and use the power of leverage in my personal opinion. 

@Brad Penley

Perhaps the best approach is to cash refi the current property, use that to find other properties that cashflows. that ways you can get both the appreciation from the prime location property + cashflow from B or C class investment properties!

@Jonathan R.

Haha yes, i majored in accounting and took a few econ class.  when you learn those stuff, it sounds like common sense, but until you learn it you have no idea about it! it's like columbus's egg!

@Dan H.

Typically, for rental you don't want to consider the future appreciation because you don't know if the property will appreciate in the same rate as it has in the future, AND you don't know if the property you WILL invest may appreciate even more!!! YOu don't know what will happen in 10 years! There are few things that are certain though: 1) he WILL get better cashflows from other properties, and 2) He does CURRENTLY have equity of $200k based on appreciated value.  everything else is an uncertainty!

It depends on the PM.  some charges lower like 8% and some charges 13%.  they have different cost structure, where usually the ones with lower % will charge you more for placement fee on the tenants and stuff.  I think the best way is for you to research on PM around the neighborhood that you are looking at, decide which one you want to work with, and use their actual cost structure on your model. 

HELOC and CAPEX are different. CAPEX is capital expenditures, which is big fixes (and usually for tax purposes you can add to cost basis of your property). HELOC is Home Equity Line of Credit. It's borrowing against your equity on the home. You can certainly use that to finance your fixes, or you can use that to purchase more homes (refer to BRRRR strategy). There are pros and cons on it though, so i would research before you take out a credit. Hope that helps! :)

hi @Douglas Pollock

By Maintenance, I assume you mean CapEx. There is a great article here on BP that I read few months ago when I first started as well (and had the same question you had).

Click Here

In general, most people would say be conservative and put in 1 months of rent, but that would totally depend on your property. For instance, 1 month of rent on a property that generates $400 rent vs $1500 rent is very different reserve (but cost of replacing a roof isn't THAT different). So the answer is, know when your roof was last replaced (and all other major CapEx) and plan to replace them 1 or 2 years ahead of its actual life. Then you can straight line and estimate.

I think the 2% you are talking about is to fix general wears and tears, not capital expenditures like roofs.  Hope that helps!

ah, makes sense. thanks for the clarification!

I wonder if that's the same if i buy and sell stocks too much. i'll have to check that. 

Welcome Jose! This Link might help you with which geographical area(s) you may want to focus on your investments on (although more relevant for rentals than flips)!

Thanks Justin. why would rental not fall into UBIT?

Hi Brad,

For that amount of equity you get, i think you can get better cashflow elsewhere EVEN IF you hired a PM to manage the property for you.  usually the PM charges 8%-13% or so of rent, so your cashflow would probably drop to like $600 or so a month on your current property.  $7200/200,000 capital = less than 4% return annually. you can find a property (or multiple properties) that meets 1% rule, then you can def beat that return easily! Opportunity cost is too great for you to keep the property!

@Dmitriy Fomichenko Thank you! i'll keep my stocks in there and do my rentals out side of IRAs then. thank you.