All Forum Posts by: Blair Boan

First time with investing here in Upstate South Carolina and want input on how to go about the home I am rehabbing. 

The numbers:

112k purchase price (cash)

30k on updates and remodel

ARV recently went from the 180's to the 250's after a few solds in the area (I am a local Realtor)

Rent will be around 1250/mo +/-

I stand to make roughly $45,500 (see below to check my math)  on the refi which is fantastic, yet the mortgage will be a lot closer to the rental rate than originally planned and wanted to know if it would be silly to keep more money in the home for a safer cushion on rent/mortgage ratio, or take as much money out of the refi as possible to use for a second project.  

Hopefully appraised value at:

250k

take out 75% = $187,500

- 112k purchase

-30k reno

= $45,500

Principal - Interest - Taxes - Insurance would roughly be $1150/mo and a 2/1 in this neighborhood brings 1200-1300 per month.

No matter what the ultimate ARV is appraised at, be it 200k, 225k, or 275k the question is to take out as much as possible for other projects or is there a fine line as to what to take out because of the rent/mortgage ratio? Thanks - hope this makes sense.

Quick question about an investment property I'm purchasing. Purchase price of 100k (cash) Rental rate of 800-950 (let's use 875 as a mark) $365 out of my pocket every month for HOA Taxes and Insurance and management That's $510 worth of cash flow every month. Cap rate is at 6.1%. Most seasoned investors say that's an ok deal. My question though, is with each year that passed and the more money I put in my pocket, does the cap rate not increase? Every year that passes, the renters will be paying me back my initial investment thus creating a higher cap rate every year. Is this even something to think about or is it always looked at from that initial investment. Thanks in advance. And for this who will tell me to go buy 5 houses with 20% down, I don't have two years worth of tax returns so that can happen until next season.

This will be a long post so I apologize in advance, but I want to make sure to get all the details in as not to miss anything.

My wife and I found a house we both like and want to purchase it. (I am a Realor in Greenville, SC)  But in a perfect world, I don't want to have to sell our current house because I owe so little on it, the mortgage is so cheap per month, and think I should rent it out to help supplement the mortgage of house #2. 

My question, in its purist form, what am I missing from these two scenarios:

Scenario 1

Sell current home - Buy new home

Sell current home realistically for 335k with 10-15k in closing costs = 320k

320k

-55k mortgage

-48k home equity line

= 217,000 at closing.

Put 100k (25%) down on new home. Keep the rest (117k) for savings/additions/whatever else/maybe pay the monthly mortgage??

Per the Mortgage Calc:

Purchase price of new home is 400K

100k downpayment

at 3.375%

30 years

annual taxes of 2,454.85

annual insurance 1,000+/-

Monthly mortgage $1614.20 - now for me, that is too big of a bill to cover at this time.  Could do it, but would really rather not.

Scenario 2

Rent current home - Buy new home

Purchase price of 400k

20k downpayment as opposed to 100k as used above in scenario 1

at 3.375% (would this change with such a low downpayment?)

30 years

annual taxes - SAME

annual insurance - SAME

Monthly $1967.87 - this is really too big of a bill to cover, but not if I could supplement some funds from a renter of my current home.

Current home costs me $480/month and that includes taxes and insurance - with increase to a 6%tax rate lets say it now costs me $600/month

I can get a reasonable $1700/month in rent for my current home.

minus $600 for mortgage on current home = 1,100/month, leftover/cashflow/whatever you want to call it.

New homes mortgage of 1967.87 - 1,100 (from current home rental savings) = 867.87/month out of our pocket. - this is a number that we would really love to work with each month.

Scenario 1 minus Scenario 2 = a savings of 746.33/month (8,955.96/year)

Now with this scenario, obviously we have the mortgage of new home offset by the rent of current home, but we don't have the money up front to do any renovations right away either. We would slowly chip away at current homes mortgage and try to pay that off sooner rather than later. And then obviously, you would need to compensate for vacancies (average of 1 month a year? - this area rents to mainly families for 1-3 year leases) and repairs. (by the way, I have never rented a property in my life and thats mainly the reason I am bringing this to the experts!)

Recap

Sell current home - buy new home - 1614.20/month out of our pocket -

Rent current home - buy new home - 867.87/month out of our pocket 

There is obviously things that I have not thought of, and of course nothing is ever set in stone from a renting standpoint, but it just seems to good to be true that I can keep my current home with a lower downpayment on new home and our out of pocket mortgage on the new home is SO MUCH CHEAPER. What am I missing here folks, what am I not factoring in, has anyone else been in this situation, is there a better solution to offset the expense of a mortgage of $1900? My main goal is to get the new house at a monthly bill of around $900. And, it also is very tempting to rent my current home because the mortgage vs rent ratio is so lopsided that its there for the taking. Isn't that called ROI or cash flow percentage in the investor world?

Thanks for any help and I salute the brave souls that try and understand this and read it in its entirety..Thanks again!

I live in Greenville, SC and work as a real estate agent. I live in a neighborhood that has boomed in the last 5 years. There is a 2 bed 1 bath home on my street that should be listed at minimum $215k. Its being sold FSBO at $196k "as is"

The only way I could make this purchase is if I pulled the downpayment of 20% from my HELOC. My home was purchased in 2007 for $128k. I owe $55k on it. It was recently appraised for $315k two years ago and today its market value is somewhere around $350k-$385k. (just trying to give as much background as possible)

Rent for a 2 bed 1 bath in this area is about $1300/month. I have used up all my free calculator uses on here and cant spitball any numbers to you but, I know the cash on cash return is at 3% or something like that and the ROI isnt all that great, but where I see a counter for that is the neighborhood and the fact that our property management division at the firm I work for has a waiting list literally, to get into this neighborhood. And also, this home is surrounded by 3200-4000 square foot homes. This house could be added onto one day and brought up to par with everything else. The lot beside it, just the land, sold for $112k. The buyers built a 3800 sqft home on it.

The unknown factors are what all needs to be done to the house.  The photos (take them for what its worth) show a typical home built in the 50s around here in good shape.  I would have to go through an inspection to see what the major factors are, but to shed some light on my personal situation, this would be a out of the box purchase being my first deal and I would need to rely on renters to cover my mortgage until I could put enough in the bank to build up a little safety net just in case of some major capital expense or if for some reason there is a long vacancy period.  And it goes without saying, that everyone in my family thinks I crazy but we all know its the ones that love us the most that usually hold us back.  

Thanks for taking the time to help out in anyway possible.  Im sure I have left some things out so please dont hesitate to inquire about anything.

To wrap up, I suppose I have many questions about the whole process but just give me whatever feedback you can, would love to see how others would go about this.  I know this would not be a "money maker" per se, but my main objective would be to simply acquire a discounted home in this hot market, and let someone else "buy" it for me.  Possibly down the road I could add on to it and increase its retail value, or continue to rent it out and pay the mortgage down.   

many thanks!