All Forum Posts by: Orlando Goodon

@Orlando Goodon - house hack!

Don't know a thing about your market, but you can buy 2-4 units and they're treated as a SFR from a lending perspective so you can put as little as 3% down.

Live in one - rent out the other three.

If (when) a crash or correction happens, you'll be in a sweet spot as your largest expense is covered by rental income from the other 3 units.

Look for some margin, so if you have to drop rents to appeal to more tenants you're not coming out of pocket.

You can actually do this once a year, so in 5 years, if you bought a 4plex every year, you could own 20 units.

A lot of people have posted about house hacking, there's podcasts about it and @Craig Curelop wrote a book about it: https://www.biggerpockets.com/store/house-hacking-ultimate

I wish you well!

@Orlando Goodon

What if a slowdown doesn’t happen until 2021? What if their is a mini crash but there is so much cash on the sidelines waiting for it that the market picks right back up?

So many questions because you can’t time the market but if you’re planning on holding onto a property or a few long term, why not pull the trigger?

What will you gain waiting on the sideline?

If there is a slow down, and people lose there job,s or incomes decrease, people will move to lower end rentals.  Rents can increase or decrease in a slowdown.  This depends on your market.  For example, if people are getting kicked out of their homes and into rentals, and the rental supply is light, rents go up not down. 

In a down marketing, you could be faced with non-paying renters which you'll need to evict.  This means you'll need to cover the expenses and or damages etc.  If this could potentially be an issue, perhaps you should start out investing in a syndication.  

A syndication will allow you exposure to real estate investing, but avoids the burden of having to evict and cover expenses should a vacancy happen.   If reserve funds are not an issue, just make sure the deal cash flows well.  You'll want to be sure you can cover all expense with the rental income.  When running these calculations, simply account for rents decreasing 10%, 20% 30% etc. to simulate a down turn.  If the property still cash-flows, it may be worth the investment. 

Very good info! I like the thought process of cash flow cushioning to resist cashflow dips. Says to me I need to be more aggressive in my cashflow requirements. I need to stop looking at break even properties. Need to make 10%-20% more than expenses. That will mean playing around with increased deposit and  seek high mid point rents. For my market, I'm thinking I need to try to get just under $2000/month per unit. $1600-$1700 should be easy enough but higher rents will be a challenge. More expensive house and therefore up front costs. 

@Orlando Goodon

Okay, I see where you’re coming from. You didn’t mention you were in NJ. I’m from Cortland, NY (Upstate) where the average price for a single house is 130k, multifamilies go for 100k-150k. Far cheaper to do multis than singles.

So what’s your plan? Short term rentals or long term?

Long term but with a 3 fam I could do both? Air BnB and long term.

@Orlando Goodon - house hack!

Don't know a thing about your market, but you can buy 2-4 units and they're treated as a SFR from a lending perspective so you can put as little as 3% down.

Live in one - rent out the other three.

If (when) a crash or correction happens, you'll be in a sweet spot as your largest expense is covered by rental income from the other 3 units.

Look for some margin, so if you have to drop rents to appeal to more tenants you're not coming out of pocket.

You can actually do this once a year, so in 5 years, if you bought a 4plex every year, you could own 20 units.

A lot of people have posted about house hacking, there's podcasts about it and @Craig Curelop wrote a book about it: https://www.biggerpockets.com/store/house-hacking-ultimate

I wish you well!

@Orlando Goodon  There is no way to know if and when a crash will happen.  You should always make sure you are not overextended and have resources in the bank.  If you are planning on holding onto properties for a long time, then it won't matter as the price will go back up...eventually.  Maybe not if you bought it while prices were overinflated, but everything you do has some risk involved.

Others will tell you if the market goes down, buy when it is near the bottom.

@Orlando Goodon

I'd do that now...why wait for a recession that might not show up? Even if we are hit, where are you investing? Some RE markets will be completely effected while others will not be as effected. Your plan sounds good, however, why not skip the SFH and jump into MFH?

In addition to the multitude of other issues, you are also making the (terrible) assumption that you will not need to put any money into the property the whole time you own it. Not how real life works, roofs need repairs, furnaces break. Also, if you have to evict someone there's more money you need on hand, plus no income for that unit for several months. Cant pay a lawyer or contractor with the equity in your house.

This also doesn't take into account the multitude of theories on whether or not its even a good idea to pay down the mortgage. I think you should back up and do a little more research before you dive into something and end up in over your head.

@Orlando Goodon

I too hate owing “people” money but if the interest rate is low enough it really can be considered free money. If you’re willing to live there for a year get an owner occupied loan (lower interest and origination charges.), apply for a 15 year loan (lower interest rate) and then after a year you can move out and get a 3rd renter. 

If inflation is 2+%, then you can pay 3% interest, subtract the tax savings, and you’re close to break even. 

How does the tax savings work? Are there any calculators for that, that you recommend? I tried 

https://www.bankrate.com/calculators/mortgages/loan-tax-deduction-calculator.aspx

and it say $12k is first year tax savings on 750k house. Does that mean I get at least a $12k refund?