All Forum Posts by: Peter W.

Brandon-  yes, my goal is wealth creation rather than cash. And I agree 100% on the equity build up- my game plan was to take home equity loan at year 7, or refi, and redeploy proceeds back into more real estate.

Agreed on "one pocket to the other" when making payments toward principal reduction. I understand principal pay downs are not tax deductible ... I just don't want to pay taxes on the pay down.

Thank you for your feedback and insights. I greatly appreciate your time.

Best,

Peter

Gotcha. Thanks Dave

Chris- my cash on cash return is derived by the healthy amortization with the 15yr.  My focus, perhaps misdirected, was in creating wealth vs cash flow. I am a newbie when it comes to investment properties and this forum is very insightful and certainly helping me to think differently. Thanks for your contribution Chris. I really appreciate you taking the time to help me.

Understood.  Thanks again Andy.

Andy, I am grateful for your thoughtful response. You were very generous in allocating time and you've clarified much for me. Peter 

Sorry for delayed response, Dave.

Embedded in NOI is 1% of purchase for 'maintenance'...I also include 5% for vacancy among other expenses. So I should be accruing a reserve fund to handle a major system failure. This is a "new" build.

I may be looking at this incorrectly, hence my question, and your patient feedback.  

I am not including principal reduction in my NOI. Is this taxable income?

I have not yet spoken with an accountant.

I appreciate your advice, Dave.

Thank you, Wayne

I've never invested in investment rental properties and I have a question.  I am buying a small multifamily unit for $1.535mm and will put down 30% and borrow 70%.

If I finance purchase with a 15yr fixed my monthly payment will be $8000 which includes $4500 principal reduction; my yearly NOI will be $96,000 so my cashflows are breakeven.

If I finance purchase with a 30yr fixed my monthly payment is $5132 which includes $1555 principal reduction; my yearly NOI is still $96,000, but my free cashflow goes from breakeven to $34,416.

The $34,416 becomes taxable (pre-benefits like depreciation) while there is no taxable income with the 15yr mortgage. Would it not be best for me to finance with 15yr?

Thank you in advance for your advice.