All Forum Posts by: Ryan PRice

$3500 is about what I paid for closing when I bought both of those rentals, as well as my primary residence. I wasn't sure why the closing costs are so hi for the refinance, I thought it might be simply be that a refinance closing costs are higher. And that maybe it is a typical cost recovery technique used for a refinance on a small mortgage.

All that aside, I'm still trying to come to terms with jacking up the monthly PITI of one property just to take on another property along with a tenant/repairs/maintenance.

Edit-- On closer inspection it, I can see that about $6.5k of the closing cost in this situation is for Points, to buy down the rate from 5.875 to 5%.  My understanding is that it should only be about $3k to buy down my rate in case such as this.

I've considered using the BRRR strategy over the past several years, but I am having some trouble coming to terms with the decreased differential between the monthly rental income and monthly PITI.  I just started the refinance application process with a current lender for one of our properties to get more specific insight into how this might play out.

I have purchased a SFR rental 5 years ago and a second rental 3.5 years ago. Raising funds (via saving) for a 3rd has been taking much longer than anticipated, and the prices of houses have gone way up in the past couple of years in my area.

Here are the current numbers/facts on the property that I am considering a cash out refinance for.

2 bed, 1 bath. SFR ~1000 sq/ft.

Purchase price $59k

About $23k total cash in (down payment, closing, repairs-- mostly sweat equity)

Monthly PITI $360

Rent $850

Current Value- $120-$140k

1-1/2 Story cape code, with possible potential to add a 3rd bedroom, bath, plus extra room to the unfinished attic, currently only pull down stairs, but it has 2 dormers, 2 side windows, plank floors, and lots of standing room. 

I just got 3 scenarios from my lender (Mr. Cooper) for a cash out 30yr refinance.

#1     4% rate- closing cost of ~$14,800 (wrapped up in mortgage), and $38k cashout. Result is a

PITI- $591

#2     5% rate- closing cost of $9,300 (wrapped up in mortgage), and $42k cashout.  Result is a

PITI- $648

#3      5.875% rate- closing cost of $?? I didn't get this number?? (wrapped up in mortgage), and $60k cashout. Result is a

PITI- $772

My biggest concern is that I'll be reducing my cash flow on this property significantly.  I understand the upside to this is getting another property, and getting back that cash flow back from that, having tenants pay down another property, possible appreciation, an increase in equity after rehab, more tax write offs etc...     However, I am still having trouble getting over how this complicates things more and more.

Ultimately I would like to cover my income (and my wife's) with cash flowing properties, but I would like to do so with as few units as possible. I'd rather have 20 fully paid off, heavy cash flow properties than 40 financed properties that don't cash flow as much.

Since we do NOT have a high income I need to find ways to expedite this process, but without being over-leveraged and uncomfortable. Perhaps some of you will have some insight as to how we might meet our goal and not stay up at night worrying about the small difference between PITI and Rent.

I'm a big fan of being frugal, and cutting out expenses, always being things used etc... but we do have 2 teenage kids that eat up (literally and figuratively) a lot of our money.    If it weren't for them we would move to a small cheap house in an area with very questionable schools, and save a ton of money every month.  We have also considered live in flips-- but I don't think we want to our kids or ourselves through that.

Hi All,

I'm considering building a garage/workshop behind one of my SFR properties. There would be access to the garage directly from the alley. The idea is to rent the garage out separately from the house, for use as storage and/or hobby use as a workspace. If I could get close to a 10% ROI (or the 1% rule) then I think it could work out very well, with less maintenance (it would be brand new) and fewer issues than dealing with a typical habitable rental. I've read the article posted on B.P. about doing this, as well as any info I could find elsewhere. There are still many questions that I have. Here are some to start.

1. Am I likely to run into any zoning issues (zone is SFR) with this, whether used just for residential storage, small business storage (contractor?) or "hobby" use?

1. Would I be allowed to have a separate electric meter setup?

- Approximately what would that cost?

- If used as a hobby work space, then heat and AC might be desirable. Perhaps a simple window unit that also heats could be the ticket.

3. I have no idea how this could play out as far as taxes go… Yes I do my own taxes, I need to hire a pro for that at some point.

4. I’m not sure how to approach the insurance aspect of this.

5. Should I use a prefab Garage (definitely with treated plywood floors) or go with a more traditional concrete pad, despite the higher initial cost?

6. There is plenty of space to build, but I'm unsure of the best size for ROI. I suppose 12x24 would be about the smallest reasonable size. But perhaps I should consider 16x24 or 20x20 or so?

While the primary reason for doing this would be to maximize profits on existing properties and land, there is a possibility that I could end up living at this property in the future. If so, I would want to have a workshop or garage at that time for my personal use. It would be awesome if it was already in place and paid for, if I end up living there. Really that would be a bonus, so I cant base this decision on the fact the I “might” end up living there in 8-10 years or so.

I would setup the space so that it could be accessed only from the alley. So that the tenant of the house wouldn’t be bothered any more by the garage tenant, than they would be by a next-door neighbor using their own backyard garage. This is in the city.

I put up a TEST ad on Craigslist and got 4 different inquiries within about 24 hours, and then no more since then, but this was just a few days ago. I think there is a smaller market for such a thing as compared to an SFR rental, but I do believe there is a market for such a space in the area.

Any advice, or experience on this topic would be much appreciated.

Nathan G. - I'll look into such an insurance program, but I do have the funds to cover such an issue if it arises.

What does one do for the tenant?   Are they expected to "tough it out" with no running water for a few days, or is a landlord expected to pay for a hotel stay while the line is replaced?

Does anyone have a suggested action plan in the event of a main sewage line emergency?   For older rentals this is something I would love to have a plan for, should the water ever stop draining due to a blockage/break/collapse  (or worse- a backup into the house) of an old underground main sewer line. 

I'm not even sure who I should contact first (plumber, specialty sewer line company, the city utility or permit office, exaction company etc), nor am I sure of the best course of action to reduce the inconvenience to a tenant. 

  I bet plenty of you have gone through such an ordeal and wished you had a plan in place beforehand....For those in the know, your input in having a plan in place for such an issue would be much appreciated.

I'm pretty new to all of this (just closed on my second rental last month), so take it for what its worth.

Here are my first thoughts...

If I had 700k, I'd buy as many high cash flow properties as I could (probably 15-20 or so SFR) with 500k (down payments, plus closing and repairs) and keep 200k for reserves.

If you buy smart, 15-20 properties could get you cash flow anywhere from $4,500-$8,000 a month right off the bat, no need to work at your other job for 10 more years unless you really want to.

It is possible for you to go into "semi-retirement" right now if you use your $700k wisely. Or you could go totally broke if you make to many mistakes, so please use caution and do your research properly.