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All Forum Posts by: Shane Evans

Shane Evans has started 1 posts and replied 6 times.

Originally posted by @Stephen Seaberry:

Wanted to correct my earlier post. The 69% IRR I stated isn't the IRR. I went back and revisited what IRR is and my answer is not how you arrive at IRR.

 Thank you for clarifying!

Originally posted by @Stephen Seaberry:

Absolutely...assuming you can achieve the rent you've presented. When NPV is factored in, it should be more than 30k. But bottom line dollar amount can be misleading. Look instead at the rates of return from the different options. Sure 30k may appear good, but if in that same period you're paying $35k in debt, you're not actually coming out on top. In this instance, assuming the numbers you presented are accurate, it seems like no brainer. Carry the debt, rent the 3rd unit, accererlate your debt pay down with the cash flow.

I'm reading this book What Every Real Estate Investor Needs to Know About Cash Flow by Frank Gallinelli. Its brilliant at changing your perspective from looking at bottom line dollar amounts to looking at the trade offs in terms of rates of return. The author was also recently on the Passive Real State Investing podcast show 049. Good stuff.

 Thanks for the feedback. I'll have to look into that book. 

Originally posted by @Jeff B.:

the "unregistered unit" comment bothers me - - the City could be baiting you and then hit you with fees and non-compliance issues.  VERIFY what needs to be done to "rent out the 3rd unit" - - not just get it registered.

 J Beard,

Could you explain this to me a bit more? I'm not fully sure what concerns you have for this. 

Originally posted by @Stephen Seaberry:

Taking a shot in the dark before I read any comments, to see where my own head is at regarding investor psychology.

With the 1 unit already rented, it looks like your coming out of pocket $1,150/month.

Plus $1,400 in SL and Car Note

You have $20k in free cash that's not currently earning anything, but has the potential to earn $1,300/month or $15,600/year.

That would mean your RR on the $20k would be 78% if you do the necessary upgrades to rent the 3rd unit.

The $1,300/month also means you'd be living rent free with a cash flow of $150/month. Free cash of $1,300/month (the $1,150 you are currently paying in mortgage and utilities plus $150 cash) could then be used to pay towards principal on SL and car not, accelerating debt pay down.

78% RR on 20k minus 5% avg SL and Car interest and 4% mortgage interest = IRR of 69%

I think (assuming I'm looking at this the right way), using your 20K in cash soldiers to generate additional income is more advantageous than using it to pay down debt. Grant Cardone would tell you to only carry debt other people can pay for. This seems like a situation where that would apply.

This isn't even accounting for the additional tax benefit you get from "making interest payments" on the mortgage.

 Thank you for the detailed explain that you gave. So what I'm getting from this is that I may spend the 20k now but it will return 30k in 2 years. And that frees up more money to pay toward my other debt. 

Originally posted by @Jim Adrian:

I would look at adding the 3rd unit and letting your money work for you.  Can you provide separate utility metering for the units?  Can you extend out your student loan payment to reduce monthly payment? Im guessing you are on a 10 yr repayment plan. 

 Jim yes I am looking into metering all three units. I can lower my student loan payment because I'm paid ahead quite a bit. 

Hi everyone,

I've been following along on this forum for quite some time and this is my first post. Thank you for your time. 

I bought a 2 family home in November of 2015 and live in one unit. (First time home buyer) after months of settling in and updating the rental apt, we just put a tenant in the second unit this month. (10 months between purchase and rent income) we are getting $1300 per month for the 1 bedroom. We pay for heat and water. Our mortgage is $2300 per month. Utilities around $150. Mortgage is 219k@ 4% interest, we pay 120$ in PMI within the 2300.

Our student and car loans are around 100k@ an average of 5% interest, with a monthly payment of 1400. 

My question to you all is what would you do with the following situation. 

We have 35k in savings. (20k of which is from an estate) We were told, to our surprise, by the town housing department that we have a 3rd unit registered. The home has an large unfinished space that is set up to be the 3rd unit. 

Should we drop the 20k into the 3rd unit or should we put it toward the mortgage/loans? I'm guessing we can get about 1300$ or more for this space as well and we would only pay for water. 

Thanks for your time and input!

Shane