All Forum Posts by: Paul G.

OK, so to give some background.

I have a nice condo that is cashflowing $300 a month.  Since I purchased, it has appreciated by 85%. Currently worth about 130K, bought at 72K. (20% down 30 year fixed).  There is considerable room above me to raise the rent.  My rent is relatively low for the area because I've had a multi-year tenant.  If they don't renew, I could easily raise it by another 50-100 a month.

My plan was to take a cash out refinance, recouping 30-40K cash, to be used for a second (and shortly thereafter 3rd) property.  By doing this cash out refinance, my cash flow would go from $300 a month to $160-110 depending on the amount I cash out.

BUT, with that extra money, I could potentially buy two more condos to make my cashflow $475 a month. (each additional property would potentially cash flow about $180 a month)

This is with a 8.33% vacancy allowance and CapEx at 5% of rental income. We replaced the entire AC and water heater 2 years ago, so those have lots of life left. At least in the first property. I plan on being a longish term investor, and I wont necessarily need the money at any point in the near future. But I also don't want to bank on just appreciation for the units I purchase.

Are those margins too small and am I leveraging myself too much for only a slight increase in cash flow?  At this rate, I wouldn't be able to finance another property for a few years, which is also undesirable.  

One other option is I can sell the Condo, and take the proceeds of about 70K and try to get into multi family, but the market out here is insane and most of the units are in warzones or close to it.

Sorry for my rambling.

@Rich V. While I agree than an MBA is definitely a very useful degree to get, I would caution you in getting it RIGHT out of school.  Your first job will be in engineering (with a sprinkling of Real Estate).  While the MBA might help you a little bit in RE, it will be mostly useless as a fresh out engineer.  I was counseled, and I believe in it, that you need practical engineering experience prior to a masters degree focused on management/business.  That way, you will have the engineering background to build upon and you will be taken seriously.

If not, you're coming out of college with no real world experience and your MBA is 95% useless, and actually can be a detriment to you down the road.  My first company wouldn't even consider an MBA from a new grad, because as a software engineer in the aerospace industry, it meant nothing to them.  It most likely wont help you get a job right out of school and will set you back another 20-30K.

Now, I know there are companies that WILL look at it, and you can benefit from it.  A friend of mine a while ago has made a great living working for Deloitte, with an undergrad in EE and an MBA right out of college.  But I've seen way too many people regret getting their MBA / Engineering Management degree to soon in their career and it becomes a useless piece of paper.

Instead, pick up the skills as you need them / learn them.  Then after about 5-10 years, if you are lucky enough, find a company that will pay for it, AND will give you credit for it when you finish it.  One more year of school equals one more year without a job, and another year you potentially will have to work...

@Doug Woodville That's a good point.  It's something I'm looking into as well once my life slows down a little bit.  I know in Arizona, there is a 6 week course all evenings to get your license.  You can even do it in a 9-12 day intensive I believe, but that's too much for me, and not worth the time off of work.

I'm a Software Engineer with a masters in Engineering Management (masters was free, paid for by my company) and my business partner is an Electrical Engineer.  The EM got my feet wet in some Finance, Accounting, and Tax, but I'm definitely weak in that area.  If I could do it all over again, the ONLY things I would have changed would have been to take a few more finance / tax courses during my undergraduate and get all my GEs done at a community college to save the 6 years of out of state tuition in California (OUCH!) ;). 

I thrive on stability through my W2 which allows me (though I tend not to be), slightly more risky in my other investments.  I prefer it this way, because it allows me to choose how risky I want to be, knowing that I have a safety net for my family.

Thanks for all the responses!  I will definitely do my due diligence (as one should do for every property), but I'll be extra careful when wording my offer on this property.

At least it will give my agent something not so cookie cutter to look into :).

I'm looking at a small condo to buy as an investment, and I noticed in the seller notes that the property may be subject to firpta... is this a deal killer? I've never heard of firpta until now and in doing my research, it looks like it's a bunch of risk on the buyer side? Can someone please eli5 about firpta and whether I should back away slowly from property. Everything else looks good and the cash flow is definitely decent... assuming this won't cause a whole host of legal/tax problems. What should I look for and what questions should I be asking?

I've never heard about subject to property acquisition (just reading about it now).  Would that be something that I could do part time while working my standard 9-5 or do you really need someone with boots on the ground for it?  How do you find those kinds of deals?

All in all, Arizona is pretty crazy right now. Multi-family are staying on the mls for about 2-3 days before they're under contract, and condos are the same way. Granted, I'm currently just using MLS for now, so when I have time to be more serious about it I'll start being more proactive.

Up until about 5 years ago, PMI would drop off of FHA once you hit 78% LTV AND 5 years minimum. The rule changed in June of 2013 where it is now required regardless of LTV for either 11 years, or the life of the loan, depending on LTV.

Did you buy your first property right out of college?  Or have you owned it for more than a year?

Is there a possibility you could buy another townhome like you currently did and move into it while you're renovating, and rent out your current place?  That should let you keep your current interest rate, and qualify for another interest rate that is lower than if you bought as an investment property right away.

@Account Closed Thanks for the response.  Does a pre-foreclosure require an all cash offer?  Or did you do financing?  I'm not overly worried about fixing up a condo.  Our first condo we bought we basically gutted entirely and started again on it.  I'd prefer not to do that again, but wouldn't be opposed if the opportunity was right.