All Forum Posts by: Pearce G.

@David Lewis  How much is "a bit delinquent" on property taxes?  Any chance you could buy it on the courthouse steps?

As @Becca Summers said, it's a math problem.  Calculate your returns with with repairs and higher rent vs. without the repairs and lower rent.

I would only add that you need to figure in any downtime.  With no repairs, you may be able to rent it immediately.  With repairs, you may lose 1-2 months of rent.

Found my first property on MLS. Bought for cash. Rehabbed. Rented. Refinanced. BRRR. Now netting about $350/mo and I have less than $5000 of my own money in it.

Yes, you can find deals on MLS, but it should not be your only source. If you don't have a RE license yourself, find an agent who knows something about RE investing and knows what you're looking for.

The most important thing is to learn how to analyze a property to see if it meets your objectives. MLS can be a good place to practice, but once you are comfortable analyzing properties, you can find them anywhere...networking, driving around, foreclosures, etc.

@Ruby S. First, to be clear, my calculation was purely a cash-on-cash return based on your 20% (34K) down payment and 415/mo net income. There may be other factors such as tax bracket, deductible expenses, depreciation, etc. that enter your overall ROI calculation.

A "good" ROI is really up to you. You weigh it against other investment opportunities, amount of risk that you're comfortable with, inflation, and your own objectives (near-term cash flow? long-term wealth-building?).

For me, I wouldn't get excited about anything that returned less than 10% cash-on-cash, because I know there are >10% buy & hold deals out there if I'm patient, and even though it is a "passive" investment, it requires more effort than owning mutual funds, for example. But if I had a mountain of cash that I just needed to park somewhere, I would look at commercial properties with multi-year leases even if the ROI is less than 10%.

@Ruby S. You're showing net cash of $415/mo after PITI. If you have a home warranty, new construction, and a 1-year lease, your maintenance/capex/vacancy expenses should be minimal during the first year. Best case is ($415*12)/($170,000*.20) = 14.6% ROI

This assumes you will self-manage. Hiring a property manager at 10% will drop your monthly net to $275 and your ROI to 9.7%.

Still not so bad, but keep an eye on expenses especially as you get beyond the first year.

Any appreciation is gravy and really doesn't matter unless you intend to sell or refi.

I was able to do a cash out refi with a local lender in less than 6 months on a BRRRR property, but it was a commercial loan to my LLC. I don't know if they would do the same for conventional/owner-occupied, but you can PM me for details and contact name.

First, don't quit your job.

Second, read, listen to podcasts, read forum posts, learn as much as you can.

Now, figure out your goals and what you're good at.  Do you want to buy & hold for long-term passive income and wealth-building?  Or do you see yourself rehabbing and flipping houses?  Is RE a hobby that you want to do on the side for a little extra income?  Or do you see yourself in real estate full time?

You probably can't answer these questions until you've spent some time on the second step, but they are some good questions to keep in mind while you learn.

@Ryan Parnow  Not to belabor the point...just trying to figure out your duplex.

As you indicated, I guess another way to look at it is you are paying 3500/yr to gain 7500/yr in equity. That's a pretty good ROI. If you don't mind the negative cash flow in the short-term, it may work for you in the long-term, especially when the note is paid and it turns sharply positive.

However...I can't figure out the numbers. It's a 15yr note. Based on the purchase date, you should have about 4.5yrs left. If the principal balance is 81.9K, you won't get it paid off in 4.5 yrs with a PITI of 1330/mo. Is the 15yr note more recent than the original purchase date? Is there a balloon payment at the end?

Sorry, I misread...losing 3500 annually.  Still, if you can't turn that positive, it might be better to take that equity and apply it somewhere else.

You have a 70K equity position in a duplex that is losing 3500 per month.  If your stockbroker charged you $3500 (5%!) per month to manage a 70K portfolio, wouldn't you want out?

I would sell that particular property--even if you have to take less than what you think it's worth--and put the proceeds toward a new property or to pay off one of your other properties to improve its cash flow.