All Forum Posts by: Nancy L.

@Gregory H. Agreed. I haven't yet had problems such as where to put that much capital, but if the goal is to have access to a certain amount of cash, my thought would be that a mix of stocks, bonds, and even CD's with staggered maturities, etc. would earn more than the additional interest payments associated with the lower equity. This would be also be liquid enough, more diversified, and avoid any issue with a LOC being called. So a person could have little or no equity and still have a safety net that's just as good if not better.

What I'm wondering about is if ppl who use NMD techniques have other ways of forming safety nets or exit strategies (other than walking away), or if it's a matter of building gradually and growing reserves over time....

@Joe Villeneuve I'd be interested to know more about that? Even just some basic ideas for further reading would help! I have done some projects with little of my own money, but had partners involved so didn't have to do much by way of creative structuring...

@Gregory H. I actually wasn't commenting on whether it's a good or a bad idea to keep that amount of cash reserve. My point was that it was the access to cash that saved your friend, not the fact that the value was in the form of equity as opposed to in some other form. However, while I agree that it might not be advisable to keep $800K in a checking account, many people have diversified portfolios that contain other types of investments which are more liquid than real estate. 

@Ben Leybovich , I always find your posts interesting.... I'd be curious to know more about your backstories and strategies... I'm sure they must be discussed in articles or podcasts somewhere and will make it a point to find out more.

@Joe Villeneuve and @Ron Averill make interesting points.... Mitigating risk is about safety nets and exit strategies. Cash can be a safety net whether it's in the form of equity, in a checking account, or under a mattress. A partner who has the cash to weather a storm is another safety net. If growing gradually with NMD or OPM, there is time there to build reserves as your business grows, to hopefully make the reserves proportional to what can go wrong before anything does go wrong.

Having 0% equity and walking away from everything is certainly an exit strategy, although one that would make it hard to get started again if it means a serious hit to your credit and/or credibility.

@Gregory H. about your friend with the lines of credit, if he had kept an equivalent amount of cash on hand rather than transferring his cash into equity, he could have likewise used it to cover those bad times.

So I think it's less about NMD vs. equity per se, and more about safety nets and exit strategies, whatever form they might take.

@Christopher Noto , Welcome! In general, the less you put down, the better your ROI. Just to use round numbers, if you have, say, 20K in cash, you'll typically do better buying two 100K properties with 10% down each than one 100K property with the full 20% down. The PMI shouldn't matter much in comparison to the additional rental income. Crunch the ROI's, as well as your lost opportunity for profit over the next year and a half while you wait, and see what's what! :)

@Karen Margrave I like your plans! I live in a row style house in Philly, which I just measured and turns out to be 14' in width. Never even occurred to me this was small, because I moved here from a 400 sf condo and here I've got around 1000 sf, plus a basement. So I basically thought it was mansion! :-p

Some questions/ideas for your plans... Is it possible to move the kitchen peninsula so that it is perpendicular to the wall that now has the pantry/storage? That would connect it to the dining area, plus pick up some storage on the other side of the bedroom wall. Possibly even worth it at the expense of a shorter peninsula, putting the stair turn at the bottom, or elongating the stairs to lose the turn.... Unless it's feasible to keep the area under the stair turn open... 

Another idea is a floating staircase, possibly even one that runs perpendicular to the long wall, so that the full width of each space can be used, while maintaining the visual openness and picking up the space under the stairs... If not a floating staircase, I'd definitely think about an under the stairs broom/storage closet.

@Account Closed Thanks for all the interesting stats!

Anyone know what's going on these days in the Mantua area, near where Dan mentioned? I actually went to Drexel, so used to spend some time near there, but that was a while ago now.

@Robin Barua , I'd add Point Breeze and Brewerytown to  @Todd Crittenden 's list... Also Germantown and Mt. Airy are some good spots that don't get as much attention. Germantown isn't improving as fast as some of the other areas, but it is improving, and has recently attracted some bigger investments from commercial developers. I've also found better cash flow there since there's less competition driving up prices. Feel free to be in touch as you get further into it!

@Account Closed Sorry for the slow response! 

Sometimes it's difficult to find a live-in investment because the priorities for where you want to live may be different from the priorities for where you might want to invest.... Where are you seeing those price points?

I have never personally looked at investments much in UCity. However I have a friend there and from what I hear, the areas south of Baltimore, east of 50th to Grays Ferry may be a good spot for a buy-and-hold because of the University of the Sciences as well as Penn's purchase of the Dupont Campus. Personally I'm open to living in neighborhoods that are a bit rough around the edges, but of course would make lifestyle adjustments in being cautious coming and going, such as taking a cab at night rather than walking around. Also, would definitely do things like window bars, but the decorative kind, preferably made by a local artist.. And possibly a home security system....

As far as those specific numbers, just to use some round figures, let's say you're looking at a $300K loan, for which you're paying about $1500/mnth. If the rental value is $3000, by the 50% rule, you'd have no cash flow. However, the 50% rule is just an average, and what's more it's an average that includes property management. So by that rule, if you're self-managing, you could get at least what you'd be paying a property manager. Plus, if you're occupying one unit, you have 0 vacancy on that unit and no unnecessary wear and tear for the time that you're there. Also, part of your loan payment goes into equity, and that should be looked at too. I definitely wouldn't rule this out if it's an option that's otherwise attractive to you. I'd look at specific numbers for a particular property, carefully research your rental comps, etc, and see what exactly your ROI might be.

Just FYI, I live in one of my investments, but when computing ROI, I include the full rental value of the unit I'm in, like I'm renting from myself.... Then I account for the cost of the "rental" in my personal budgeting.

Welcome! More tips on checking out neighborhoods/blocks if you're not doing so already: Walk around as well as driving thru, visit a corner store or whatever is there. If you're especially interested in a particular section, check it out at night as well as during the day. Stop for a few mins here and there and see what you see... I do not necessarily suggest trying these tips at the same time in some areas. :-p

I saw a thread on here somewhere about doing land contract deals for such a purchase, but don't remember what it was called.