All Forum Posts by: Tandi H.

Any updates from @Phil C.?

We have a unit plus two garages on shared gas and electric.  We are turning one garage into another unit, and one garage into a shop.  So there will basically be three separate rentable spaces.  Does anyone have recommendations for the gas and electric submeters?  There is wifi on the property so having access through a desktop or phone app would be ideal.

Thanks

@Allan C.. Ok thanks for the confirmation.  Yes, I do then have the added carrying cost of the 33k...and another factor which makes it even more complicated is that after adding the new third unit to the second property, I would plan to refi that property which would now have a much higher value.  

Then I would have the benefit of the cash out from that second property refi and also the carrying cost of the new higher mortgage and a higher monthly payment on that property to consider.  But I think this second refi would result in pulling out about 80-90k, which could then be put into a new purchase...allowing me to keep growing my portfolio.  

In terms of the construction cost, the 33k should cover all of it including architect and permitting fees.  The space is a fully enclosed and insulated garage now, so we would be building out the interior, and adding windows and doors and new stucco to the exterior.  It's about 700 sq ft.

@Allan C.. Hi Allan, thanks for your input and the example.  I think I would be making more than the 10% return....

Let's say I used the 33k to create an additional rental unit on an existing property, which makes 800/mo or 9600/yr, minus 2400/yr in less income from the refi'd property.  That would be 7200/yr on 33k, or 22% return, right?  

@Tom S. I didn't consider a HELOC, but that's something I will look into. I'm generally of the camp that prefers to keep as little equity as possible in properties, to have access to it. That's why I was looking at another refi.

@Shaun Weekes We would use it to either:

1.  Add another unit to one of the duplexes - my husband does all our work, so that project is dependent on him having enough time off his day job.  Which means it can take awhile to get done.  The unit would be the conversion of a 2-car garage into a one bedroom unit that would rent for about 800/mo.

2.  Purchase another rental property - it could be the down payment, we are doing a trip to visit a family member who is interested in partnering on rentals in their area.  It would be good for us to not be only based in our current hometown.

Hope that clarifies the use of the refi cash.  Either way in the long run we would be getting more cash flow, though less from the refi'd property.  

We are looking at refi'ing a property while rates are low again, mainly to get some cash for creating more units on an existing property and/or new purchases. We've bought one property a year for the past three years, and currently have a SFH and two duplexes.

Property details: SFH, appraised at 230k and refi'd last year, did not pull max equity out (novice move, we know). Currently has a 133.9k mortgage at 3.75%. Mortage at about $660/mo plus about $200/mo escrow for $860 total.

New refi would be at 4.375%, 70% LTV (max this company offers). Based on last year's appraisal of 230k that would mean pulling out 172.5k - 133.9k = $38,600 - $5000 closing costs = about $33k cash.

Total monthly payments would go up $200, from $860 to 1070.  Rent is 1300.

The cash would be used to add another unit to a duplex or to purchase another property.

Is this worth it?  Any thoughts?  Thanks.

@Wes Blackwell - thanks for a well organized post and starting an interesting thread!

My .02:  I agree with the historical data that new technology will not create legions of unemployed - new jobs will arise.  AI is a non-issue in terms of employment over the longer term.  There will of course be localized and short term disruptions, but new options will evolve.  

UBI is detrimental to individual development - I would rather see that money spent on free education, improved physical and electronic infrastructure, drug rehabilitation, financial counseling, and other systems that empower people by creating a supportive framework for them to improve their lives themselves.  When people who already have life management issues get more money, they tend not to use it effectively to improve their situations.  A more supportive society would provide free higher education for those who want it, giving those born without wealth the chance and incentive to improve their situation.  Better infrastructure would make our country more competitive, speed up innovation and commerce.  Drug rehabilitation and financial counseling are needed for those who already have issues and need help to learn better life skills and problem solving.  

As one poster noted, many adults are just "big children".  For whatever reason they didn't learn needed life skills from their parents or society.  What is needed is good education and economic laddering, not freebie handouts without any considerations or consequences.  

Also, the inflationary effect of UBI would in the end negate the impact, especially for the middle class who would bear the brunt of the tax burden, further weakening economic equality and widening the economic gap.  Any taxes imposed on business would be passed on to the consumer via higher prices.  The inflationary effect would impact all assets, including real estate.  While there might be some good times short term, within a few years it would zero out.  For the most part, "there's no such thing as a free lunch", though of course there are exceptions to every rule.  But talking about the overall condition of millions of people, that would hold true. 

Thanks everyone for the overwhelming responses in favor of #2 - makes my decision a lot easier!  Especially the points about sticking with a screening policy to avoid any issues of discrimination.  I wouldn't want to get into any legal issue.  

This community is so helpful, much appreciated!!

Thank you @Brian Hamel @Dennis M., and @John Underwood...sounds like there is agreement to go with the better credit applicants.  I was swayed by the possible lack of tenant turnover with Candidate #1, but you are right, who knows if they will really stay long term or not.  I did ask them about their rent payments, they said they paid late once a year and a half ago, due to their payroll error...not great to hear that they are cutting things that close.  

Hi @John Underwood, thanks for your input!  That's a good point.  The recent late payments are a concern.

As a mitigating factor, would you consider Candidate 1 if they paid an extra month of rent up front, or some other financial commitment?

Candidate 1:

Single guy, employed 4 years nearby, lots of connections in neighborhood, one cat.  

Pros: Looking to rent long-term/indefinitely, doesn't plan to move as he wants to be in this neighborhood. He has been at his current residence for two years and said he would stay if it was in this neighborhood. Good income. From a local family, grounded in area.  Seems quiet and low maintenance.

Cons:  Credit issues, most from about 4-5 years ago.  Recent bills have been paid but a few are paid 30-60 days late according to credit report.  Says he can have his sister co-sign if needed.  

Candidate 2:

Young professional couple, employed at university, thinking about getting a small dog.

Pros:  Stable employment, good credit.

Cons:  Plan to move out of area in 1-2 years.

Who would you pick?  The no issue couple who will be moving on in a year or two?  Or the getting-his-credit-fixed but stably employed guy who might stick around for a long time preventing turnover costs?