All Forum Posts by: Nick A.

Hey everyone - 

I was about to sit down and put together a spreadsheet from scratch to calculate the ROI on potential AirBnB rental properties, and thought I could potentially save myself a good deal of time by posting here.

Does anyone have a handy spreadsheet that they use to track all the obvious variables (vacancy rate, mortgage payment, mortgage pay-down, appreciation, etc.)?

If so, I would be extremely grateful!  

Best,
Nick

@Ben Zimmerman

The peace of mind factor was less "hassle-based" and more "financial-security" based, which is why I mentioned that having my primary paid off checks off the latter for me.  I don't mind the phones calls during dinner, etc.  My firm manages over 200 clients in nearly every time zone, so I'm used to being "on call" all the time with the CEOs that I work with.  This would be just one more phone call; not that much more incrementally painful in the scheme of things.

Still, you make a good point.  A mix of tax-free munis and energy stocks might come close, with significantly less hassle.  I guess I want to diversify my income streams a bit, as I already have a ton in the market and it would be nice to have some coming from real-estate that I could actually "touch and feel" (as apposed to REITS, etc.).

@Brent Coombs

I'm guessing your CPA would recommend that you put even LESS than 50% of your own cash down for rentals? Would you listen to THAT suggestion? ie. Your family home wouldn't be at risk.

You have a good point - I really have nothing against putting 25% down on the first rental property vs. 50% as long as it cash flows, because either way if I get into a bind I can just pay it off completely.  I'm not going to go beyond one property for at least a couple years though, so putting 25% down doesn't really save me "time" or allow me the "freedom" to buy more properties, since I won't want to for a while.  

I think I should re-title the post as Debt vs. Cash :)  I was originally just trying to get some "pros and cons" guidance on different types of properties for a first-time investor.

What is the benefit of that equity if it just sits there?

Peace of mind that I don't have a mortgage.  And after 30 years of a $1.1M paid-off house appreciating in an up and coming town, when I decide to downsize at the age of 65 i'll fund a good chunk of my retirement, or hand off a nice asset to my kids.

If you could hypothetically take $100,000 on a HELOC and turn it into $5,000 per month cash flow would you do that?

No, I wouldn't.  I'm never going to leverage my primary residence ever.  Again, peace of mind factor.  It's not worth the $ to me.

Yes that equity would be great, but you would be missing out on most of the tax advantages that comes with the higher leverage. 

This is why I'm willing to just put 50% down instead of paying cash for my first property.  Even though the mortgage interest deduction gets SEVERELY reduced in my income tax bracket, I'm still ok with that amount of leverage.

Also the opportunity cost of possibly buying another property with some of that down payment money.

Cash to buy multiple properties will not be an issue for me.  Especially since I'll be taking it very slow and likely won't ever have more than 4-5 properties.

Hey Tim - My situation is a bit unique in that I really don't like / need debt to get things going. I actually have 86% equity in my $1.1M primary residence. You can probably tell I'm counting down the days/dollars until it's paid off! This is much more of a peace of mind factor for me. I own a digital marketing agency (high stress for sure), make 7+ figures, and have a family of four to support (my wife doesn't work). I'm just going to sleep better knowing I never have to worry about payments on my house again, so I'll never use a HELOC for anything - regardless if the math says I should. My net worth is high enough where the peace of mind significantly outweighs any mathematical benefit. That being said, my CPA swears up and down that I should but my first rental property with 50% down instead of paying cash, so I'll listen to her. In terms of programs, I'm honestly just going to read every book I can get my hands on over the next 6-9 months, grab a mentor or two, and see where that takes me. I should be in a good place by mid-next year to grab something - which leads me back to my original question ...

Hey everyone -

First post here as I'm just getting my feet wet, but I'm looking to buy my first rental property within the next 6-9 months and was curious what you would recommend for a first time investor.  I'm waiting until I pay off my primary residence and will likely put 50% down or something along those lines.

I've heard that a single family will appreciate the fastest, but has more of a hassle factor in terms of managing it. Condos are low maintenance, but you have the HOA fees. The duplexes available in the Boston market are typically in rougher areas that come with another set of issues.

If it was your first rental property, which of the three would you go with (all other things being equal - assuming they were in the same quality location).  Or even better, what DID you go with for your first rental property and why?

Thanks in advance!

Best,

Nick