All Forum Posts by: Shaun Sullivan

@Kevin Yeats @Jeff G. why would you not include the $1,000 with the other $700.  Unless the seller will give it back, it's $1,700 gone, not $700.  Ignore the entire $1,700.

Quick glance at some listings in Boise, and it does seem appreciation is the play there.  Better than 50% increases since 2012, so not surprising to see rent/price ratios on the lower side.  However, along with that big recent appreciation comes the history of 40%+ value drops from 2007 to 2011... certainly not the biggest drops we saw, but bigger than most of the country.  So again, appreciation is a speculation play.

You can plug in an appreciation rate projection into a spreadsheet and calculate your IRR with both cashflow & appreciation combined. I think a minimum acceptable IRR when depending on appreciation should be higher than a minimum IRR for huge cashflow areas... to be compensated for the additional risk. If the IRR isn't competitive with other passive investments like peer-to-peer lending, REITs, stock market, etc, then buy & hold real estate might not be the best use of investment dollars in that particular area. Maybe wholesaling/flipping/etc are better strategies there. I'm just starting the learn my own area, so I'm not going to suggest that I know your market well enough to know the answer. Just trying to give you some questions that I'd be asking myself.

One thing it seems most are agreeing on is that this property will not be a cashflow generator with the current mortgage, so consider that if cashflow is your primary goal.

If appreciation is your primary goal, need to make an educated guess on where it's going.  Decades into the future it's pretty certain that the value will be higher than today, but if you bought in 2007, here we are 10 years later and the values in a lot of places (including Boise it seems) still haven't gotten back there.  The question is what's your expected hold period, and what's your risk tolerance?

After all the other expenses, you'd likely have negative cash flow, so the only way it could be considered a decent investment is if you're expecting some really good appreciation, which depends on that specific market.  As other people on here have said, that's speculation and more risky.  Even with appreciation, unless it's gonna be about the hottest market in the country, you're still looking at a rent/price ratio of around 0.7%... most places with decent expected appreciation should still be closer to 1%.

Not sure if there's a separate moral issue, but if it's purely a financial decision, I'd rerun the numbers excluding the $1700.  That's a sunken cost.  You're not getting it back either way.  So decide whether it's worth purchasing with the remaining expenses and cash flow involved.  You might also consider the fact that the your remaining time commitment to get this deal done is less than you'd spend starting on another from scratch... so how much is the time savings worth to you.

@Russell Brazil  again, thanks.  A lot of great info packed into that one paragraph.

Looks like rents on Cimarron/Cypress are lower than Stratford for equivalent BR/BA, but market value is also lower.  A 3BR/2.5BA/1264SF on Cimarron/Cypress seems to average around $1300, with a market value in the $120Ks.  2BR/2BA/1050SF on Stratford appears maybe a bit higher in rent, but with a similar market value in the $120Ks.  Of course these are averages and depend on condition, finishes, etc... but I think it illustrates the point.

Some of that extra stuff you mentioned might slide the lever more towards the condos.  Still though, seems that one tiny community at the edge of Ballenger Creek might be worth keeping an eye on.

@Russell Brazil I had a thought and wanted to run it by you. The price/rent ratio (at market value) seems a bit better on Stratford than Cimarron, but they also have different costs, right? Stratford condos have additional city taxes and higher HOA fee. With it being a true condo (not TH), I assume that some of a typical CapEx allowance could be accounted for in the HOA fee. I mean, you wouldn't have to pay for a roof, the main entrance to each unit is inside, unexposed to the weather, etc. Looking at the numbers though, city taxes are about 0.7%, right? so about $60/mo extra. And the HOA fee appears to be about $80-90/mo extra, but maybe reduce the CapEx by $40-50/mo? That's about $100/mo lower cost on the Cimarron TH, with market values being similar. Looks like Stratford might get an extra $50-100/mo in rent though. So even though the ratio might be a bit lower on Cimarron, the net cashflow might be about the same.

I know each deal would have to be analyzed on its own merits and not based on the entire community, but just something I was thinking about.  Thoughts?

Thanks @Account Closed

Country Side is off rt 85 just north of English Muffin Way.  Street names are Cimarron/Conestoga/etc.  It looks like it might be the only part of Ballenger Creek where getting close to 1% is possible.  Currently a property there that's been listed for awhile, and it has me interested... existing tenants until mid-2018.  Get the price down a bit, and it looks like it could give a bit of cashflow along with the potential for some appreciation, which seems impossible in the big cash flow locations.  Can't hurt having Westview expanding nearby.

anyone with knowledge on this?

There are usually closing costs associated with a refi, just like closing costs on a purchase.  Often you can get the lender to pay all costs, in exchange for a higher interest rate.  If you have closing costs coming out of your own pocket, it will take time to recover those costs with interest savings.  I'm just recommending that you know what the break-even period is, and if you plan to sell within that period, the refi might not be worthwhile.

However, if your reason for refinancing is something other than just lowering your rate (getting equity out to invest elsewhere, for example), then the break-even period might not be as important to you.

@Marquell Jones