All Forum Posts by: Timothy Lon

Hello All,

Looking for some opinions from more experienced investors.

The basics:

I close on my first investment property this following Monday. It's a SFR, 3/1.5 in a C+ neighborhood. Cost is $39,900 and will most likely rent for $700/month.

I plan to have this house paid off in 18 months, at which point I will begin using the additional cash flow for future deals, savings, etc.

The question is at what point, numerically, can I stop putting the normal percentages (i.e. 7.5% for vacancies, 10% for maintenance) away from the rent monthly, or at least reduce the amount to use more of the income for future investments?

I've read on here a number of times about having enough reserves to cover six months of mortgage/taxes in case of vacancies.  However, with a cheaper property like this that would mean I only need approximately $1,500 in reserves.

Obviously, I want to keep adding to the reserves as quickly as possible, and not think about slowing down until I have much more in reserves.  $1,500 isn't going to repair a roof or even a number of major repairs that may happen within the next 5-15 years.

I was thinking once I reach $10,000 in reserves for this property I can begin to think about contributing less, and I can merely build up the reserves at a quicker rate if maintenance or cap-ex start to significantly deplete the reserves.

All opinions welcome.

Thanks.

@Andy Madden, I've heard good and bad things about Avalon, as I was looking at a few properties there but decided elsewhere.  Most of the negative things I've heard stem from the fact about 70% of the residents in the areas are renters vs. homeowners and the market is flooded/competitive for rentals (I've looked up some numbers and they do seem to be roughly in that range).

My thought process (I'm a newbie, but still) is that if the place has decent PM or self-management and is priced fairly it will rent *shrugs*.

@David Krulac that's good to know, thank you.

@David Krulac, I used a VA loan for my first house, not FHA* (typo)

@Andy Madden, I work at one of the power plants down in Shippingport, PA.  Currently renting in Moon and it's about 30 minutes commute, which is tolerable working as many 12 hours days as I do.  Anything much further than Mt. Lebanon would have to be a great deal, then again, I would probably be willing to make a maximum commute of an hour one way for a great deal (most likely only on a hack in that situation, I wouldn't want my primary residence that far away for much more than a year or two).

@David Krulac, I did use an FHA loan for my first house.

I got out of the navy/moved home. Bought a house with VA loan in hometown (Ellwood City), market in the area continued to decline due to areas nearby stealing the life out of it IMO (Chippewa Township for example).

Due to various factors, made decision to pay down heavily the last year, got out from underwater, and recently sold it on 4/22 and walked away with a small amount of proceeds.

I know that with an FHA loan, if you eventually convert it to a conventional loan, you can reapply for another FHA loan. Would I be right to assume that the same can be done for a VA loan, since I currently do not have one?

Thanks guys.

Hello All,

So I'm looking for some personal opinion, preferences, and insight.

I'm beginning the search for my second property (first closes on 7/8 hopefully) and I would like to either use the FHA and 3.5% down route to buy more, and purchase a 2-4 unit, living in one side for at least a year, aka a househack,

or,

I would like to find an area in the Greater Pittsburgh area, SFR, for about $165,000 or less (this would ensure I'm paying less on the mortgage then I currently am while I'm renting, with the intent to make larger payments I'm used to making and paying it down quicker). I know appreciation can be a gamble, as compared to cash flow. So, while being able to rent it out when I move and cash flow (even if it's still highly leveraged with the same initial mortgage payment) I would also like a place that is at least stable, with a decent chance for appreciation.

I have begun to look in areas such as Moon, Mt. Lebanon, and Dormont to keep the commute to work 45 minutes or less.

Does anyone have any personal opinions, hack vs. SFR, as well as locations to begin looking for both.

Thank you.

Hello All,

So I'm looking for some personal opinion, preferences, and insight.

I'm beginning the search for my second property (first closes on 7/8 hopefully) and I would like to either use the FHA and 3.5% down route to buy more, and purchase a 2-4 unit, living in one side for at least a year, aka a househack,

or,

I would like to find an area in the Greater Pittsburgh area, SFR, for about $165,000 or less (this would ensure I'm paying less on the mortgage then I currently am while I'm renting, with the intent to make larger payments I'm used to making and paying it down quicker). I know appreciation can be a gamble, as compared to cash flow. So, while being able to rent it out when I move and cash flow (even if it's still highly leveraged with the same initial mortgage payment) I would also like a place that is at least stable, with a decent chance for appreciation.

I have begun to look in areas such as Moon, Mt. Lebanon, and Dormont to keep the commute to work 45 minutes or less.

Does anyone have any personal opinions, hack vs. SFR, as well as locations to begin looking for both.

Thank you.

@Mike Sedlacek, it's great to hear someone has executed the plan I'm going to attempt, with great success nonetheless.

Unfortunately, this first property is a SFR, but when I start looking for investment property #2 in 6-12 months it will be at least a duplex.

Question:  Do you mean $100,000 in rents collected, or do you mean $100,000 a year in pure, after all expenses, passive income?

Rough mortgage + taxes will be $262 per month.

I'm putting down the standard 20% for a conventional loan, so the down payment will be just under $8,000.  Also, there is going to be roughly $2,300 in closing costs and fees that should probably be included.

Rough estimate for profit is $1,200-$1,500 first year.

SFR:

Listing Price - $45,000

Accepted Offer - $39,900

Rent: $650-700 (Conservative estimate) ($800-850 aggressive)

Running the numbers, I've assumed the conservative rent estimate of $650 for the area, 7.5% for vacancy, as well as a conservative estimate of 10% for maintenance as well as 10% for cap-ex, for a total of 20% put aside for upkeep (the place is approximately 80 years old so I know maintenance will be a real thing).

The area is decent and low crime, although only being a couple miles away and "up the hill" from a D+/C- type neighborhood allowed me to get the place at a decent price.

The numbers I've run has my monthly passive income in the range of $75-125, depending on a few factors I won't know for certain until I own the property.

I know that's not the magic number of $200 monthly per side/SFR. However, the low barrier for entry, and the fact that I should have the place completely paid in full within 12-15 months were the deciding factors.

I know that paying it off in full will potentially lower the ROI, even though it will improve the monthly cash flow, as well as "waste" money I could be using as down payment on future properties. However, my personal plan is to have 2-4 properties in this price range fully paid off in the next 3-5 years, cash-flowing, and serving as a "baseline" of sorts before I start getting heavily invested and leveraged.

Opinions...thoughts?

Thank you.