All Forum Posts by: Trevor J Dammon

Hi @Taylor L.,

Thanks for your input. Much appreciated.

I meant to say that the property is 100% owned and there is no remaining debt. In which case I think cap rate and cash on cash return are the same if I'm not misunderstanding. I have started to look at IRR and to me this is the most logical metric to evaluate properties by, however I currently don't have enough of a foundation to make all of the projections required to estimate IRR.

As far as tax implications go I will have to do a bit more research.  I know I can use depreciation to offset some of my gains but beyond that I don't know much.

Hello all,

Newbie here. I'm trying to compare returns on real estate to returns in the stock market and I am wondering if it is fair to compare the cap rate of a fully paid off property to the annual ROI of a particular fund in the market.

If I own a $100,000 property with a cap rate of 10% is this the same as a $100,000 investment in a mutual fund that returns 10% ?

I know it is possible to use my properties equity as a line of credit or to take out additional loans, so what would be a better way to go about comparing the two scenarios.

I am looking at purchasing my first property, a duplex, to live in and rent for a few years. Eventually I will move into my own place and keep the duplex as a rental. I have the option to take physician loans which require as little as 0% down and will not charge PMI. I am trying to decide if putting 0% down is a good decision even if I am capable of putting 10-15% down. I know that the interest rate will be slightly higher so I need to do some math on loan rates and expected returns and compare cash-on-cash and a few other metrics.

In terms of scalability will I have trouble getting multiple loans with 0% down? If the driving factor of getting another loan is debt to income then it seems like it shouldn't matter if all my debt is in one property or if it is spread among many. 

So if my plan is to scale to 10+ units should I be looking to get loans with the smallest down payments as possible assuming the ROI is the same. Or is it better to put 10-20% down and leverage that equity when possible.

For reference the duplex prices range from 400k-700k and annual gross rent would be around 48k. Household income currently around 200k but in 3 years after residency will be closer to 350k.

Hi @Joshua Messinger,

Thanks for the reply. Why would our equity build up slower?  We would be paying the mortgage whether we live there or not. Our cashflow would be reduced, but we wouldn't be paying rent else where so I think that evens out.

Hi all,

I am going to be moving to a larger city next year and want to start on my real estate journey. My plan is to buy a duplex, live in half, and rent the other half.  My wife is currently a medical resident and in 4 years she will be a doctor, at which time our household income will likely go from 220k to around 400k.  Some time within a couple years of this we will be looking to move out and get our own place.  From my research duplexes in the city tend to have a cap rate around 8%. An average property value in the area I am looking is around 550k and monthly rents would be around 2k.  

When I start looking at annualized rates of return I notice that around year 5 I have my best returns. The rate of return looks like it drops slowly until year 20 where the rate drops quite sharply.  Once the mortgage is paid off assuming that the ratio of rent to property value remains constant my annualized rate of return should be around 4% (half the cap rate) assuming half of rent goes to repairs and maintenance and other expenses.  4% is below what I could get if I just sold the property and stuck the money is a mutual fund.

So what I am trying to figure out is the pros and cons of selling at different times. 

I think I can use a property value to obtain another loan so this may be a reason to keep something even if the rate of return is low. But at the same time if the property is worth 500K couldn't I sell it and get 5 loans for 5 new properties with 20% down.  I'm a total newbie when it comes to loans so I don't know how realistic this is.  

On the other hand looking at the math it makes sense that I should sell my property when the next years annualized return (not cumulative) is projected to be lower than the first year annualized return on another property.

Any help would be appreciated.

I'm looking to begin my investing journey with an owner occupied duplex. I'm looking in the Minneapolis area. My plan is eventually to move out and keep the duplex as a REI. One thing I have noticed is that most of the buildings in the city are 100-120 years old. Does the age of a building matter much when creating a real estate plan or can I ignore the building age if the HVAC, roof, and foundation are all much newer. If I hold for 30+ years I could end up with a property that is 150 years old. My fear is that at this age buildings will lose value even if renovations and repairs are up to date.