All Forum Posts by: Samuel Leatherwood

Has anyone operationalized the word saturated? Is there a metric that investors are already using for this supply/demand oriented concept?

When someone says there are no deals, for example, we at least all have rules of thumb in mind regarding cap rates or cash on cash return etc. Yet I keep noticing a bit of squabbling over the ‘saturation’ word without any numbers to help us think more clearly about the real question at hand. 

While I love ambiguity in my art and I recognize some of REI is an art-form rather than a science, I am also always looking for ways to increase accuracy in my analyses.

Hey @Sidd Chitnis. A lot of my friends used to live in Long Beach (Skateboarding Central). Fun town. I am excited for you to get started in REI. I am in Orlando and down to meet up or chat anytime. Good Luck!

Thanks for taking the time to put together the thoughtful analysis @Bill Roland. Although it is important for new investors to avoid analysis paralysis it is also important that they approach investments with realistic expectations and an understanding of all the numbers. In your opinion, what markets and strategies are a better choice for a new investor?

Curious to get your thoughts, Bill!

Hello @George P Cannon!

I am excited to hear that you are jumping into real estate. As others have noted, you could take out a HELOC on your primary and use those funds for a down payment/renovation. For various reasons, HELOCs are best used as short-term debt. In other words, if you are going to use your home equity to purchase a rental, you should have a plan for paying that off in the next 3-5 years.

Although it can be temporarily disruptive, if you are willing to move then you have a few more options available to you. This would be the house-hacking option that other posters are mentioning. The value there is that you can buy a house with a mother in law, garage apartment, a duplex, triplex etc...without having to put down 20-25%. If you plan on living in one of the units, you will have financing options where you can put significantly less down. 

If you did decide to move, would your primary residence be worth keeping? Would it pay for itself and/or cash flow in the near future? These are just couple things to keep in mind. 

I live and work in Orlando. If you want to meet up sometime or chat, reach out! 

Hoping we can all reach our goals in 2023. 

Hey Nick! @John O'Leary gave a pretty good short list. Most markets in Florida will have opportunities for your price point, but depending on affordability the neighborhoods you can get into will vary. I am living, working, and investing in Central FL. Feel free to reach out with any questions! Also, keep us posted about your journey.

Hello, Jordan. 

Both of these approaches can be great and it depends more on how you want use the property and how the numbers shake out. Were you planning on doing a STR or LTR on the 2nd unit? Are you open to either? If doing something short-term, you could probably see a greater return on a smaller space like an in-law suite. More important than the property type is going to be the property itself (location, price, condition, etc..). In addition to affordability, make sure you are keeping an eye on ROI as well!

Personally, I am in the early stages of converting my detached garage into a 2nd unit that I currently plan to rent long-term but will have to reevaluate as construction costs add up. 

Reach out anytime!

A little late to this post but as Derek said I think the long-term goals are the important part here. The cost/time of the ADU are a con yet the added value and then appreciation of that added value are the bigger win in the long-term. If you are more concerned about time and short-term cash flow then you may want to go the path with the RV but that opens another set of issues with neighbors, zoning, etc.

If your long-term goal is an LTR, why not build the ADU with enough amenities to work as a long-term rental as well so that when you move out of the main house you can LTR two units?

I meant to write quadplex.  ; ) 

Derek is spot on, @Jordan Alequin!

Keep in mind that if you are calculating what you can afford based on an FHA loan and if your property is 3-4 units then the self-sufficiency rule applies. The maximum monthly mortgage payment will be limited to 75% of the total rental income (the unit you would be living in still counts toward this number). This percentage must be at least enough to cover PITI on the property.

Example: You buy a Triplex. The Triplex is $450,000. Let's say your PITI was $3800 per month. Now, let's say market rents are 1250 per unit. That is gross income of $5,000. 75% of $5,000 is $3,750. In this scenario, you would need to change your down payment to around 5% to bring your PITI down within the 75% of rent range.

Hope this helps! Reach out anytime.