All Forum Posts by: Peter Austin

@Brian Kantor, very interesting. Thanks for sharing will check it out. Good luck, sounds like you did some good research.

@Brian Kantor, thanks for the reply. All good points you make. Question for you, how is the long distance RE investing going? Why did you choose Detroit?

@Kris H. I looked at the case shiller index over the last 20 years and US housing prices increased around 3% per year. Based on that I took a haircut to be conservative.

@Jason Pedersen

Thanks for sharing, feel like your my west coast twin! Ha! It's interesting because we live in such high priced areas and we have the opportunity to deal with the "devil we know" so to speak. While it may be flat in cash flow, you know the property and the history which provides a level of comfort. Like you, I've done some upgrades (albeit smaller), I also know what might be an issue down the line and my HOA is very well funded. All that helps guide my decision.

My wife and I have a four month old and we plan on buying a house.... where, we don't know yet. I worked out a private loan for 3-4% to use as a down payment. For you and me, while certainly possible to invest in other areas, it's much more comfortable to be able to invest locally. Assuming a 2%-3% appreciation, your talking a 14%+ ROI which is still higher than the geometric average return of the S&P (again assuming cash flow is not negative).

That last paragraph of yours sums up exactly my thinking. It also sounds like you are doing the right thing. Best of luck to you!

Thanks,

Peter

@Dan Schwartz

Hi Dan,

Thanks for the response and sending that link. I assumed 2% growth per year to be conservative, I believe it to be higher than that. I stole a page from B. Turner’s approach.

If any area in Hudson county is going to see appreciation, I’m convinced it’ll be Hoboken. Since Pre COVID, Hoboken is a high demand area close to NYC especially for younger people and couples. I believe things will come back to normal over the next few years and that demand will continue. Question is will the rents hold, that I need to wait and see.

Appreciate the point of view.

Thanks,

Peter

@Justin Thorpe

Hi Justin,

Thanks for the reply. Feel like you are reading my mind. I love that idea of keeping it for your kids or it basically being their college education if you sold it down the line. There’s no need for me to get a PM since I know the property, live nearby and I know handymen that can fix things if I give them a call. Only included to go by the book (Brendan Turner’s book).

Pre COVID, Hoboken was a thriving city...it still has a lot to offer just hoping more restaurants don’t close. I’m hoping that people realize how close Hoboken is an alt to the city...great place.

Thanks,

Peter

@Mark F.

Hi Mark,

Thanks for the response and the advice on the 2/5 rule...just looked it up really interesting. I do need the $$ for a down payment but worked out a private loan that’s beneficial to both parties. It’s an added yearly expense but the interest arbitrage is there.

As for air bnb you're correct that's a no per the HOA.

Peter

@Gabe Cinquepalmi

Hi Gabe,

Thanks for listening and the advice, appreciate it.

It is a gem actually. I am the top floor (5th floor) 7 blocks from the Hudson River. I have a view of the NYC skyline including the Empire State Building, Freedom tower and Hudson yards. I was thinking just what you said, see if I can get the rent in a year and if so ride it out for a year or two and see. Worst case I can sell and likely (hopefully) the market is back in full swing assuming people want to be near or in NYC area. I just bought a new HVAC and washer/dryer. Building was built in 2002 so in pretty good shape.

Again appreciate it!

Peter

@Mack Benson

Hi Mack, first off thank you for taking the time to listen and reply I very much appreciate it. You make some insightful points.

Bought the place for $659k have $492k mortgage. Gross equity is $233k right now (assuming $725k holds). Wholeheartedly agree that if I could go out of state and do the leg work could find a better deal. Read David Greene’s book on long distance RE investing but I have a hard time investing where I can’t physically see the property.

Thanks again!

Peter

Hello All,

First time poster, just getting into RE investing. Wanted to pose a scenario to get your thoughts if you don’t mind. Thanks for reading.

SHORT STORY: Bought a 2 bed/2 bath condo 5 years ago. Looking to rent out next year, however: $0 Cash flow; 0% CoCROI; ROI: 13.6% (10 years @ 2% growth/yr). An appreciation/pay down play. Is this worth it?

Details:

SCENARIO: Bought a 2-bedroom/2 bath 5 years ago in Hoboken, NJ (across the river from Manhattan). At the time did a 10-year ARM @ 3.125% thinking we'd sell and move on 5-7 years down the line. However, after reading about rental properties and the low interest rates I decided to refi to a 30-year @ 2.875% last month.

CASH FLOW/CoCROI: I ran the numbers and including all fixed costs (mortgage, taxes, HOA, etc) and variable costs (repairs, capex and vacancy) I am break even (math below). If I include property management, I'm in the red but I plan on managing the place myself leveraging a handyman. Needless to say the CoCROI (cash on cash) is basically 0%.

Monthly Cash Flow

$3,500: Rent

($2,045): Mortgage

($626): Taxes

($325): HOA

($37): Insurance

($150): Capex

($150): Repairs

($175): Vacancy @ 5%

($8) Cash Flow (w/o property mgmt)

($350): Property Mgmt

($358) Cash Flow (w/ property mgmt)

ROI (rough math): The place is worth $725k today. If I assume a conservative 2% growth rate for the next 10 years (arbitrary # of years):

$901k: Sale Price 2031

($70k): Sale Expenses 2031

($367k): Loan Payoff 2031

($197k): Invested Capital (initial 20% down payment + accumulated equity up to 2021 less fees if I were to have sold it)

+267k profit

ROI = (267/197k)/10 years

ROI = +13.6% (if I assume a 3% growth it's closer to 28% to 29%)

Is it worth getting into if you’re breakeven on cash flow? Again, thanks for your thoughts.

Peter