All Forum Posts by: Po Chan

I bought a property 9 years ago for 52k that has long been payed off.  3 years ago I refinance the house and took out 87k to buy a 2nd house which I am currently living in.  The payment on that 87k loan is rounded up to $600/month.  The 1st house has been rented out and generate $630/month after all expenses including the $600 monthly payment for the 2nd house; now, my thought is that I am getting $630/month plus a free house!

The 1st house is now worth 160k and I can expect around 80k after commission, closing cost and 87k loan if I sell the house.  I am trying to calculate the ROE of the 1st house to decide if I should sell the house to finance other rental properties with better cash flow.

My question is, when calculating ROE, should I consider $630 as the only source of income or should I include the $600/month payment which will make $630+$600 = $1230 as the income?

Using $680 as income, ROE is then 630*12/80,000 = 9.45%, which is ok but I am sure I can find something better.

Including the $600 I am paying for 2nd house, ROE is then 1,230*12/80,000 = 18.45% which is great and I should keep the house.

Lastly I think value of the 1st house has reach its peeks and will not go up for much longer

Thanks for reading, your input are appreciated.

Thanks for the encouragement.  29 Palms is a military town, we figure renting out individual rooms to to marines would maximize the revenue for this property.  This is going to be something complete new to us, this is going to be a learning experience.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $93,000
Cash invested: $110,000

This property was bought with intention of using as rental unit. After a realtor told us the house would sold for $160k, we figure we will give it a try at selling it.

What made you interested in investing in this type of deal?

The number seems to make sense

How did you finance this deal?

HELOC from another property.

How did you add value to the deal?

Fixed up the kitchen, put in new tile floors, repaint the whole house, fix AC, patch up walls, ceilings and everything else to turn the property into a livable condition

What was the outcome?

Still a work in progress, too early to tell

Lessons learned? Challenges?

Should have a detailed plan from the begging and stick to it. By flipping back and forth between different plans we wasted many time and resource.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $42,000
Cash invested: $7,500

Split level house with 2 tenants

What made you interested in investing in this type of deal?

Ugly house on the market for a long time

How did you find this deal and how did you negotiate it?

Found it on Zillow, asking price was 47k, offered 52.1k cash as the competition was very fierce.

How did you add value to the deal?

Added 3 bed 1.5 bath and a kitchen to the house by finish the basement and garage.

What was the outcome?

The addition brings in additional $950 rental revenue to the property.

Lessons learned? Challenges?

Wished I know the market better and have more confidence to buy more.

I am new to the valley and I have also been looking for buy and hold properties that generate cash flow from long term rentals in and around Indio.  Maybe i am looking at the wrong place, but they seems to have all but disappeared in today's market.  Does anyone have suggestions on where or how to find long term rental properties that that makes cash flow works?