All Forum Posts by: Nick Yanutola

I'm thinking the better play is to sell it, and use the capital to acquire a purpose-bought multi family property that will hopefully have better month to month cash flow.  Here are my updated monthly estimates on standard cash flow (not including any "bonuses" like appreciation and principle reduction)... any additional thoughts would be appreciated.  I spoke with a property manager about realistic rent expectations and called the county to verify exactly what the tax increase could be, so I have a good expectation that these (admittedly conservative) numbers are pretty accurate.

Since this thread, I actually figured out that my assumptions about how the taxes were calculated were all wrong, and I've created an updated set of data that is actually even less in my favor.  That being said, if I actually utilize expenses that are closer to what mine have been over the years, I'm more or less breaking even on a cashflow basis (maybe a small profit) before appreciation and principle reduction.  Based on the total equity in it (effectively about 60k) I calculate about an 8% return for the year with fairly conservative numbers.

So... I'm still undecided.  I know it is not a deal that an investor would likely buy into as is, but, I already have it and probably wouldn't lose my shirt on it.  I'm trying to decide if renting it for a year or two would be worth it for developing some connections in the industry... I could then sell and use the proceeds to get into something purpose-bought from the start, and already have the resources/connections to get that new property into shape quickly and efficiently.

I can post my new numbers if anyone is interested.

@Greg S., Ross. , if you could explain that with specific numbers on a property that is 100% financed vs. one that is 100% owned, I know I would much appreciate it...  If you are assuming a certain return on equity that is above the ~5% or whatever in the mortgage, it makes some sense, but that seems like a fairly bold assumption.

I guess... if the house appraises at X after a rehab, and you take out X, how are you going to have a positive, or even close to zero, cashflow at that point?

To the OP, I don't mean to clog up your thread... if you are not interested in this just say the word and I'll go away. 

Thanks

It seems to me as a newbie that refinancing to get as much equity as possible pulled out of the rental will just raise the mortgage payment and therefore reduce your free cash flow, so I'm a little curious as well about why this is such a widely used tactic.

I get that if you can apply the equity to a new property, you have more rent coming in, but you also have more mortgage interest going out, less potential buffer for capital improvements or maintenance, etc etc... less positive cashflow in general... right?

 Hey there Greg,

I've seen you say this in two threads now, and I'm just wondering what criteria you are using to say whether it is a "personal" home or not, and why exactly renting a "personal" home would not be a good investment vs. a house that was never your primary residence... Thanks.

Thanks Tony...

Just to be clear, the $100 to $200 most people want to see in free cash flow... is that including tax deductions or not?  If I apply the zillow rent value (want to call a local property manager to at least inquire about this), use the 50% rule for maintenance, and assume the property taxes double, I get:

1675 rent - 883 mortgage - 837.50 maintenance = about -$45.

And that is before any property management fee if I wanted to go that way.

I believe I would get a large chunk back at tax time that could possibly bring the average for the year to +200/month or more, but I want to know if people are counting that in their calculation, or do they want to see my -45$ number be +200 instead, before a tax refund?

Thanks all for he input.  To address some of the questions above:

1) House is actually worth: I would estimate, 210k.  If I were trying to sell it I would put it on the market starting at 215-220.

2) Remaining loan balance is $123,xxx

3) Mortgage payment is currently $808.  The current tax portion of this is $73.xx.  I guess I'm not understanding how they calculate the tax portion.  The internet says 4% for a primary residence, but this is more like 0.4% of the taxed value, which is around 180k.  Internet says 6% for a non-primary residence.

4) Work it needs:  Yard is in pretty good shape.  I've put a good bit of work into the yard over the years.  The interior I think would need some stuff to get top of the market rent.  Mostly cosmetic like carpets, paint, light fixtures would be the biggest things.  It could probably stand for a set of new counter tops as well.  The roof is brand new.  HVAC replacement will be coming soon.  All the major appliances are in it and function perfectly except for washer and dryer, which weren't in my new house, so I took those with me.

Rent:  Zillow says $1675.  I'm guessing I'm not going to get quite that much without freshening up the interior a bit.

The write-offs are all items I got out of this article:

https://www.landlordology.com/tax-deductions-for-l...

In terms of going upside down on the loan, that is not a concern; prices here barely move at all in either direction (even during the housing crash) and I've got about 40% of the total value of it in equity right now.

So it sounds like the thought so far is that it isn't worth it for equity appreciation and unless I can develop numbers that will show a positive cash flow, it is probably better to sell.  I can see the logic in that as well.  If I sold and had the equity balance in a market investment that would return, say 4 to 8% a year, I would need net positive cash flow of $0-200 per month to achieve the same return renting it, if I do count the ~220/month of principle that would still be going in.

Dunno yet, the more I look, the more it looks like a wash all the way around.

I'll check out that calculator, thanks!

Hello all,

New member here. I just found the website researching some stuff related to the issue below.  I recently moved (not far, just found a house I like better).  That leaves the question of what to do with my former residence.  I was looking for tax deduction information, and found bigger pockets.  I've been doing some additional reading here, and refining my list of inputs based on what I've learned so far.  I guess I'll give some specifics since it will probably be additionally helpful.  I would be grateful if you experienced landlords could let me know if you see places where my numbers are obviously jacked up.

-The rent number is a couple hundred under the Zillow estimate... hopefully slightly conservative.

-Using the "50% rule" (that was a new one on me) I just split those anticipated operating expenses evenly between repairs and maintenance.

-The mortgage is currently less than the number shown, but I'm anticipating a tripling of the property tax if I don't sell, so I assume it would go up to something close to the number listed.

-IF my numbers are right (and hopefully I can refine them here) if my yearly cashflow on average is right at zero, is it worth the headache just for the equity appreciation?  I'm not in an area where the property prices move much, so it would mostly just be my mortgage balance shrinking over  time.  If I sell, I'll probably clear around $60k in equity out, that I could put into easier market investments, or whatever else.

Thanks for any input.

Thanks!