All Forum Posts by: Matthew Rutledge

This sounds like the right attitude at least. The big problem is the times you want to use it are likely the same times someone else wants to rent it. (Holidays, etc.)

If you were aggressive, I'd bet you could cover half the costs in a given year without too much trouble. Not quite what I would call investing, but a good way to reduce the cost of ownership for a personal use place.

-Matt

Location, location, location.

My friends 2 bedroom, 3BA near winter park only gets rented about 5 weeks a year and another couple weekends. Some other people I know have a one bedroom slopeside in breckenridge that they can't get into if there is snow on the ground.

I'm sure the property management & placement company has a fair bit to do with it as well.

In my book, you probably won't make money on it. I'd be shocked to hear you covered the expenses every year. But if you're looking for a place to use, it's not a bad way to go.

Thanks for setting this up Anson. I know I'm out for January due to that pesky day job. I'm really hoping to make at least four this year.

-Matt

I think you folks may have just about talked me out of it.

Maybe I'll run the numbers again and see how low the purchase price would have to be to make it seem like a "good" deal. Who knows, if they MUST sell they might bite on a low offer.

Thanks BP!

-Matt

The deal is marginal. Especially as a stand alone property. That's why I'm here and not on the phone with my realtor. :-)

In terms of cash flow, I am OK making tens of dollars a month. Especially when after a pretty short time I can be sending a couple hundred a month to pay down the principal elsewhere.

I'm totally anti HOA for properties I live in. Considerably less anti for rentals. So far it looks like the HOA is pretty solid. The last two years have seen some reasonable maintenance (roofs, parking lot repair and paint), and it doesn't look like they've had to do a special assessment yet. I don't see much of anything lavish going on, that's for sure.

Good points though. Thanks for the input!

Remember with a condo you're really only responsible for the stuff on the drywall side of the studs. Plumbing work I can handle my self and can be done cheaply (and right!) if you know where to shop. Even the electrical parts are really simple to swap out when they wear out. The place has central hot water, so the most expensive thing that might need fixed is the carpet, and at about 500 square feet, that cost is minimal.

As for why do the HELOC... Having equity in your home is only worth something if you do something with it.

That's sounding more like a reality check.

My most conservative run with the calculators shows a shortfall of $72/month. And that money all goes towards property management ($55/month), vacancy, and repair. Strip all that out, and it's positive by about $16/month.

My other property can cover the shortfall, and still put money towards the planned repairs and vacancies there, and still have a few extra dollars to throw at principal somewhere.

Again, as a single property, it doesn't look all that great. But as a long term part of a portfolio...

My original plan was to use my HELOC to get into some place that needed too much work to qualify for a traditional loan, fix it, rent it, refinance it and release the HELOC. But that's proving to be rather challenging.

Thanks for the feedback. Keep it coming!

Even in this market the asking price is almost too good to be true. I think lack of finance options is the only reason it's still on the market.

Sadly and/or luckily I will get no added tax benefit from the depreciation. (The day job treats me very well...)

I haven't done all the math, but I think if I were to feed the cash flow from my current rental to this one it would be paid off in the 6 year range.

But since I would be using a HELOC to fund the purchase I do need to take the extra step to show that I'm not really risking my primary residence by purchasing this.

I've let myself get a bit emotionally involved in this one. Please talk me off the ledge!

I've run this through the calculator, and it says it's a negative cash flow deal financed under 15 years, pretty much even at 15 years, and a money maker in the 20-30 year range.

For some reason, I can't get it out of my head.

It's a condo in Colorado Springs, CO (about 100 miles from my home west of Denver). Asking price is $38,000. Rough guess is that's about a 10-15% discount. It looks like rent should be right around $550. HOA is $125/month and includes pool, trash, water, sewer and snow removal. (That info doesn't change the numbers, but makes the place more rentable.) Taxes are a mere $205/year. The neighborhood is pretty nice, but not upscale. I was figuring 5% vacancy, 10% property management, and 1% repairs.

Here's the kicker - My mortgage guy told me most banks won't touch a note that small for any real length of time. If I do it, I will really be stuck using my HELOC with a 10 year repayment. (Cash flow negative.) I guess there's a new rule that defines a mortgage as risky when fees exceed 1% of purchase price. This is where my gut says to walk.

But then the brain starts in. We can eliminate property management and just go with a tenant placement service ($800-ish). That makes things a bit better. Repairs? It's a condo. What can break? Vacancy? My other rental can cover a month here and there.

The gold nugget in my mind is that after a mere 10 years, I should be able to comfortably take half of the rent and use it to pay down the other rental, my primary residence, or a yet to be purchased property. And if everything stays flat, I will have purchased nearly $40k worth of property using only about $8k of my own money.

As a stand alone property, it seems to be pretty weak for my situation. But do we ever look at the whole portfolio? Combining income/expense with my other rental, I am still cashflow positive at the end of the month, and am just about at a point where I would feel comfortable taking the cashflow piece from the existing place to pay down the new note faster. Then we have equity building quickly in the condo (10 year note being paid down rapidly) and a cashflowing single family. When the condo is paid for, turn that back around and accelerate the pay down of the SFR rental... And that's where I get all wrapped around the axle.

I've been looking pretty hard for the last month, and I'm just not finding a whole lot that makes the numbers work. I think I'm starting to feel a bit desperate.

Thanks for help!

-Matt

This was going to be the night I was finally going to get down to meet the Denver group. Alas the J.O.B. has a group of people in from out of town and I can't make it.

-Matt