All Forum Posts by: Travis Silva

Thanks Jaysen and Anthony for the feedback! I've contacted my insurance company, and have ensured that I do in fact have both a Landlord Policy, as well as an Umbrella Policy.

I think the last question I have is around the second account. So I set that up today, and we are full steam ahead. 

Should I transfer my mortgage auto-draft from my primary checking to my new one, so that everything is in one account? The other option would be to leave my mortgage where it is, and then manually transfer the amount of the mortgage every month, while leaving the profit in the new account.

Thoughts???

Hey All - I am officially brand new to being a landlord. As of this past weekend, I had my first tenant move in. Being my first rental, I've utilized a local PM company that has pretty reasonable rates, and they got me a great rental rate.

My questions are around the best way to go about 1) protecting myself and my personal assets from any liabilities if something were to happen, and 2) the best way to go about managing the property (payments, profits, repair fund, etc.)

1. 1) I've seen lots of contradicting posts of people stating that you should absolutely set up an LLC, and others that said having Liability Insurance is a better route (I now have a landloard insurance policy through LM. Same thing as "liability insurance"???) Which one is the best route?
2. 2) As far as managing the investment, should I set up a second checking account through my bank so that my deposits from the PM go straight into there? If so, should I transfer my repair fund to said new account? Since the mortgage is coming out of my primary checking, is it best to transfer my mortgage amount from the new checking account to one that is drafted for the mortgage, then leave the profits from the rental in the new account moving forward?
   

Thanks in advance for any help, and excuse my lack of knowledge here. I am brand new to this and hoping to do this the right way from the start.

Thanks for the input, Andrew! I do realize that no matter what there will be  unforeseen expenses, and I like to consider myself handy enough to tackle most repair tasks. Also, great point on vacancy. Hopefully there won’t be too much lapse between, and one can only hope to have great tenants that stay for a few years. Another great point is that refi rates will differ between owner occupied and rental properties. I’ll have to dig more into that. My HOPE is that even at a break even point, the market stays consistent and the equity continues to rise. 

Jeremy - thanks for the feedback. You are spot on, the Raleigh market and it's surrounding areas are definitely booming. As far as cap ex goes, it's a townhome that's is maintained by the HOA, do roofing, yard, etc. is covered. It's also a relatively new home (built in 2011), so I figure that things like HVAC, etc. still have quite a few years of good life (knock on wood). End goal here for us us to have a rental property that steadily goes up in value, even with minimal cash flow, and ultimately sell in X amount of years for a substantial profit. I also have a few other non real estate investment avenues and hopefully plan to partner with a buddy of mine who is in real estate at some point in the future to secure a few more rental properties. This would just be my first. Another reason is that I am newly engaged, and we will be consolidating in the next year, and are entertaining ideas, as she too owns a home. It just so happens that have more equity in mine and am in a more desirable area.

So I posted a while back about renting out my home with negative cashflow, and potential for a much higher equity gain YoY. I got quite a few responses, with most leaning towards the idea that negative cashflow is never a good idea. Figured this time, I would pull some numbers and pose a refi scenario -

Total Mortgage (w/PMI) + Insurance + Prop Tax = $1670/mo

HOA dues = $113/mo

Total = $1783/mo

Estimated rental based on others in the neighborhood = $1650/mo

Negative delta = - $133/mo

Based on my ownership since June 2018 (roughly 16 months), and looking at multiple recent comps in the neighborhood that have recently sold, the average equity growth is roughly +$16k ($1k/month).

Current interest rate is 4.75%. I've pulled the numbers of refinancing at a 3.75% rate (current market rate), and that saves me about $173/mo overall, putting me at +$40. I also should be about a year out (maybe less) from having 20% equity in the home and being able to drop PMI, which would add +$71, thus putting me more in the positive at +$111/mo

The area sees steady growth, very populated, 5 miles from RDU international airport, tons of shopping, etc. I've spoken to an agent and a mortgage broker that I know, and they don't foresee any downswing in the Raleigh market in the near future (I know....Anything can happen....). I will also not be hiring a PM company, as our new home would only be about 20 minutes away.

Looking for thoughts/input on this overall plan. Any advice/criticism is much appreciated!

Thanks for the input here, Jiri!

So what I left out to keep things from getting too overly complicated, is that my girlfriend (hopefully soon to be fiancee) and I both own homes in the area. Would there be any benefit to selling one, putting that money towards paying down the principle on the other? Then re-appraising to get rid of PMI while also hopefully refinancing at a lower rate to bring down the overall mortgage price simultaneously? What if this put us at breakeven or a slight positive cash flow?

My property is a townhouse that is very central to things like the airport, shopping, downtown, etc., so in theory, my place should be pretty easy to rent. 

Great to see you live in the area and are familiar with the constant growth.

Hey All - New to the forum here and need some opinions from investors who rent single family properties.

We are planning on up sizing/building a house soon, and we are trying to figure out what to do with our current home. We are on the fence about selling our current home, or keeping it as an "investment property". Based on the rental comps in my neighborhood and in the area in general, we would be seeing a negative cash flow. Now I know negative cash flow is almost never a good thing to have, but lets play out the scenario below -

Lets say that all in (Mortgage, PMI, HOA, HOI, Prop tax) I am right around 2,000/month.

I could potentially rent the home for 1700/month putting me at a 300 deficit or negative cash flow per month. 300x12=3600/year in negative cash flow.

The estimated value of my home has consistently grown between 10-12k/year, and based on the current estimate, I have around 40k in equity at this point.

I'd really like to keep this as an investment property due to the substantial yearly growth that my city sees, however, is it worth it?

My options -

1) Sell the home, take the ~40k in equity and put that down as a portion of the down payment on our new home

2) Keep the home and eat the 3600/year in negative, and hope the consistency of 12,000+++/year growth stays constant. Then in a couple years get it reappraised and hope to drop PMI. Maybe even refinance for a lower rate in the future depending on the rates? (Right now it is about 1% lower than when I bought)

Full transparency in option 2 - I know the market and economy are extremely volatile, and anything can happen, however the city I live in (Raleigh NC) has been continuously exploding over the past decade. I also understand to an extent that playing the "equity game" is risky as well.

Any advice is much appreciated!