All Forum Posts by: Andrew Allen

@Josh Barnett I have a rental house in Killeen and its been my worst investment, as my house value and rents have not even kept pace with inflation since I bought the house in 2003. Driving around any neighborhood at random it seems every other house is for rent. There is lots of open land and developers are building houses as fast as they can. From talking to @David Ivy it sounds like multifamily might be a better investment. 

Have you been to Killeen before? 

I will be happy to share my numbers with you btw.

Seems like there is confusion between cash-on-cash ROI and total ROI, and ROE (return on equity).

Cash-on-cash ROI is the cash flow returns based on how much you have invested in the property. So if you're making $3k per year but invested $30k your cash-on-cash return is 10%.

Total ROI includes this plus appreciation, amortization and depreciation benefits. Your ROI is way higher than 5% if you include these things.

ROE includes these things but is based on the amount of equity in the property (instead of how much you have invested)

Based on your description of your situation, I would look at your return on equity (ROE), which basically tells you what the equity sitting in the house is earning (make sure to include all 4 aspects I mentioned (appreciation, amortization, depreciation, cash flow).

If your ROE is less than your debt rate, the book answer is to pull equity out to pay off the debt. 

@Juan Cordero That is a good idea, and @Dan Burstain has it right, the demographics of Austin are your friend, especially if you will live there for several years. Rents will likely be higher when you move out and maybe you wait to move out until rents get to the point you will cash flow even with all those expenses included?

Have you considered getting a "fixer upper" duplex? Then you could maybe get a discount...you'd have to fix 1 side up immediately but you could be more patient on the side you are living in.

Juan, do those numbers count taxes and insurance? Doesn't sound like you're accounting for maintenance, vacancy, and other costs that will definitely occur at some point. How will that affect your numbers?

@Darald Berger are there local meetings in Cedar Park & Leander? Or are you referring to ones in Austin?

@Suvarna Joshi good question about Leander. It's on my list to do some research into which zip codes and towns around Austin will grow the most in the next 5-10 years. Not sure if that even exists though. 

I've looked as far out as Llano and the market even way out there seems out of control. 

@Suvarna Joshi I live here and feel like I don't even know the Austin market well enough...  :-)

I think the market is inflated right now though we are somewhat protected by demographics and long-term growth. It's entirely possible I'll look back in 5 years at how "cheap" property is right now...haha. 

I have 2 SFH in Round Rock, 1 was an okay deal I found on MLS. The other was a great deal but I got it off market. I think that's really the only way to find good deals now in the area. I pretty much am constantly shopping but have only bought 2 in the past 3 years.

Looking for recommendations on local banks in the Austin area that will provide a LOC against the equity I have in 4 houses and/or other assets. I haven't called anyone yet...figured I'd ask here first so I'm not spinning my wheels.

Thanks!

Sounds like you are trying to convince yourself to take a certain course of action... :) Have you looked at other "big picture" things beyond what you mentioned in your first comment? Like macroeconomics, state & local governments, demographics, vacancy rates, home builds, etc.? One location might have positive cash flow today but if you're looking to buy and hold you should be thinking 5-10+ years down the road also.

Awesome @Nirmal Khanderia and pleased to meet you!