All Forum Posts by: Sunny D.

You get 500k of tax free gains on sale of primary home. Considering the high rates at this time and opportunity to lock in tax free capital gains of 500k, suggest you sell and lower mortgage on your new home 

Personally a 40 year mortgage is a bad idea, some of the developing economies have these long dated home loans, it's a bad sign if these get popular in the US. 

For a 300k loan
Total approx. interest payments and equity growth after 5 years are the following in these 3 scenarios
https://www.calculator.net/
1. 15 year loan at 5%: $127K (total interest), $76K equity after 5 years
2. 30 year at 6%: $347K (interest), $21K (equity after 5 years)
3. 40 year at 6.5%: $543K (interest), $9.5K (equity after 5 years)

Rates will be higher for longer maturities. 

you barely build equity with 40 years, your goal should be to be debt free.

a debt free home giving you 2k cashflow with disciplined long term growth is better than 10 doors , 200$ cashflow.

I have 4 loans on my investment properties all for 15 year terms. Low rates, rapid payoff vs. perpetual debt

 

 Becca

You are doing the right thing by not flipping bay area home for 10x the headaches by buying a larger no. of low quality assets. The  cash flow crowd  and the ones repeating what the gurus tell feel the only way to be rich is to have 100s of doors. Multi asset offers scale but the days of easy money due to cap compression are gone and will not return. 

the issue with buying 10 of 100k homes vs. 1mm class A asset is that you have 10x PM costs, overhead, Capex costs turnover costs, and your probability of having atleast 1 bad tenant that won't pay and game the system is close to 100pct. PM charges for turnover are not cheap and pro forma usually underestimate true bills. Basic painting and fixes can be 3k per home , roof cost is same whether it's a 1mm home or 100k home. The reality is as percent of home value, your expenses will be a lot with class C. I made money in Cleveland (all class c+) as I bought cheap in 2017-2018. The homes I bought for 55k are worth 120k. If I included all the turnover costs and capex expenses, I didn't make any money via cashflow. I won't be buying there at today's prices as I will surely lose money with limited future appreciation. When markets go down, your class A home won't drop as much and will spike in next bull run. I can't afford in bay area to buy for investment home, so buy in folsom. When it's time to upgrade my primary home which has appreciated from 1mm to 2.4mm in last 10 years, I will rent it out and buy a new one as my mortgage is fixed and long term appreciation is enough for me vs. cashflow.

investing systematically every month into an index fund is a good approach. I think in 6 months to a year, as multi asset values drop when owners cant refinance and cashflow is negative will be forced to sell, you can consider investing into quality conservative sponsors into new syndication deals.

My first CA rebtal home in Folsom, I bought it for 255k in 2012. I rented for 1750$ and broke even on cashflow. I took a 15 year mortgage, refinanced at 2.25 pct and only have 40k left on the original 205k loan. I paid off a few 100$ a month once in a while . Property is worth 700k and rents now for 2850$ with 1000$ cash flow.  In 2 years I will own it clear. I don't plan to refinance,  the cash flow of 3000$ is what I seek. There is no need to keep chasing volume in assets, I have 2 other sfh in folsom that will be paid off in 10 years. Cashflow is not king, debt free with high quality growth assets is the king.

Always asset Quality vs. Quantity for long term wealth. Listen to people whose net worth is more than yours. 90pct of the cash flow crowd make less money in real estate than someone who has a class A property and gets increased cash flow as rents go up and gets appreciation as well over time.

You have couple of years to decide on selling to get primary owner tax free capital gains. Now is a bad time to sell as buyers are burdened by high interest rate. You know the area, self manage, find a qualified tenant with good income and credit history who can sign a 2 year lease. 

 As someone who dabbled quite a bit on RE last 7 years, my suggestion is sell but buy in A or B+ neighborhoods , otherwise invest in a syndication with fully vetted sponsors. A lot of new sponsors popped up last 3 years when rates were low, go with ones with atleast 15 plus years of experience and understands risk 

Quote from @Terri-Leigh H.:

Quote from @Bill F.:

Terr-Leigh Huleis' current status

We haven't even touched the topic of heirs and what will happen when they learn of the sales terms AND if the seller had the mental competence to enter into the sale... I bet I know the position the former will take about the latter!

“Heirs” are aware… When she was in heart failure I contact all 3 to let them know and ask who could come down and be there, they all refused. They cut her off, one has legal troubles.
We tried to give everyone the option to step in, everyone opted to not be involved. We all make assumptions.

And we had multiple of her friends, church people involved to attest to competence. 

I’ve mentioned as much but I can’t convince you otherwise im sure.

 The fact thar within 24 hrs of the post, a pipe broke and cost went from 5k and a few hrs later to 25k fails the smell test. Insurance covers for this sort of damage. Did you get landlord insurance? 

I got 3 sfh rentals in Folsom and never had issues finding good tenant. First home bought in 2013 and two last year. Only complain is that I didn't catch the trend and buy sooner. Typical sfh rent is from 2600 to 3000$ for 1750 to 2000 sq ft homes. I never had my home vacant for more than a week.