All Forum Posts by: Steven Smith

@Willard Blair

I’ve used Cozy since purchasing my rental property. It’s been great for me with no problems. My tenants like it too. The 5-7 days it takes to get rents is not that much of an issue either. I’d say give it a try.

I've thought about this for the past few days ( I actually thought of nothing else) and listening to all the great advice, I've come to the conclusion that I AM thinking about this all wrong. I strongly agree with @Russell Brazil, @Joe Splitrock, and others. This is not a typical investment property with 20% down. It would CF strongly if I put that down. As others have stated, I can't expect great CF from a property so highly leveraged. (Remember VA loan). I will be living on the property for at least 2-3 years and I can move it in a positive direction during that time. I'll re-evaluate this in 5 yrs, then again at 10.

Since I don't happen to have $120K free money just lying around, I feel I can make this work with what I have. I have sufficient cash reserves to handle the inevitable repairs/replacements that WILL come up. I will manage the property myself for a while just because I want to learn that part of this.  

Thanks everyone for the advice. I'll move forward with this unless the appraisal comes back in a bad spot. I'll be sure to come back to BP for any future investment advice.  

You guys are great! Feel free to connect with me because I sure could use some help. :-)

@Joe Splitrock Thanks. How do I change the cap rate? Currently from my worksheet it's showing a 6.63 purchase cap rate. As someone stated, that's not uncommon in CA. 

@Steve K. Monthly expenses: $4,564.75 Monthly income (after a small rent increase): $4,250.00. I could raise rent more to tighten the numbers. And I do have cash reserves to carry the property for a bit. (Hope I never have to). 

@Russell Brazil That is correct. I'm not bringing in much and since this a VA loan, I don't want to. I don't plan to live on the property forever, but when I leave I'd like to have it stable and producing something if only a little as I move on to bigger (or smaller) things.

@Judy Parker Waiting on the appraisal to come back. I think asking price is a little on the high side, but a lot of value add is already done. We'll see if I can get a lower number. Also considering buying points to get the interest rate down. 

Some here suggested that I immediately raise the rents to market rate. I agree now. (Sorry my future tenants). 

One other thing I have done (Don't know if this is right) is, on paper, increased rents to market ~$1195 each unit (instead of the small increase mentioned above),  I took out things like cap ex, regular maintenance, etc, and I end up with ~$200/month cash flow. I don't need this money right now so 100% if it will sit in an account for things that go "bump" in the night. I know that's not much, but it's better that loosing that amount each month

I know the BP way is always separate "Cap ex" (for instance) and other variable expenses from profit and as much as I believe in BP, I feel I can use my own mind for some decisions.  (That's what God gave me a brain for). :-)

Forgive me as I continue to learn this new part of my life in Real Estate. I know I will make mistakes along the way, but I'm tired of sitting on the sideline. 

Thanks everyone.

@Daniel Reyes I have a high risk appetite. I also invest in stocks and ETFs. I did analyze the area and while the price (600K), seems a bit high, the property has many improvements. The loan has been approved and in underwriting. I still have time to back out if II don't feel right about the deal. 

I really feel this will be a challenge  for me to turn this nice, low rent paying property positive. 

(I happen to love challenges).

@Bjorik Mutize Yes, all units are occupied. I'll be living in one of them. I'll be learning how to landlord before turning it over to PMs once things go positive cash flow. 

So many great responses I can't answer them all!!! 

To hit a couple of good point I've seen. 

Carmichael seemed like a nice area. I went twice to look a properties before deciding to invest there and my brother who's lived in the town for years vouched for it.

I would have to raise rents ~20% to get them to market prices. You can see my apprehension to do that all at once. It would very much cash flow at that point around $250/month. 

I could also put more money down on the deal. That would bring monthly cost down. I'm considering that before closing. (I was trying to hold on to a much cash for future troubles). 

Since starting my real estate investing dreams, I've always wanted a 4 plex (Don't ask me why). In this area decent ones are hard to find. I've been searching for months, only to be disappointed again and again when I arrive only find the nice pretty pictures on the internet don't even come close to reality.

My Real Estate agent told me (Which I already knew), There are more than one way to invest in RE. Pay down to add equity, appreciation, value add (not one of my options at the moment), and cash flow. I plan to hold on to this property for at least 10 yrs (unless it turns south), so there's room to grow. 

Thanks for all the great advice, to walk away, not walk away, make it work, It's your money so crack on, etc, etc. 

I'll take the next few days to think things through. 

Thanks everyone!! 

@Lindsey Iskierka Wow 750K, I thought my deal was high at 600K. 

I was thinking of raising rents anyway. The apartments have already been renovated so there's not much value add. 

The rent is very low right now, so the only way to move this towards the positive end is to do just that. 

The $200-$300 is after all (including me), pays rent. Only until I raise rents to the market rate for the area will I see cash flow. 

@Ned J. Yes, I will be living in one of the units. I will be for a time being be paying higher rent than the rest of my tenant, but I will own the joint! :-)

@Joe Splitrock Yes, if I had 120K (20%) to put down, it would cash flow like crazy and we wouldn't be having this nice little conversation. :-) 

Thanks @Ned J. @Dan Maciejewski @Jay Hinrichs

I do have a plan to make it eventually cash flow, it will just take a while. I posted this question to see if starting out with negative CF was a good idea. I hear you all loud and clear. 

I really don't believe I need to add value to increase rents. They are well below the market rate to start with for that area. 

House hacking is something I always wanted to do. 

Thanks again everyone!

Hi Everyone, 

I think I should add here that I'm getting into this property with only ~24K down. Not a LOT of money. lender is giving credit for most of the closing cost. I'm using my VA loan so I'd be living there for a spell.

Still not so good of a deal???
:-)

I appreciate all the great replies!!. 

@Dan Maciejewski, Yes they would, at market rent, but I won't be able to do that at this point for fear of running everyone out! :-) 

Current owner hasn't raised them in a long time. Tenants  get use that kind of stuff. 

I'll take the slow approach. 

@Andrew B. Those were my thoughts. I do have the capital to support it out of my own pocket (For now).