All Forum Posts by: Vik C.

 Yes, I'd really rather not give up my place. I bought in mid-2012 so there has been some appreciation but nothing crazy. At the end of the day, after the tax-breaks and principal paydown, I am flushing less down the toilet than I was while I was renting so it's not a bad position to be in. And no rent inflation which is also nice in Manhattan.

Sounds like if my rental properties are cash flow positive I should not run into DTI issues down the line. Perhaps once I get to 10 properties I will have issues getting loans for Fannie Mae reasons, but that's not something I have to worry about yet.

You have more experience than I do in that area, but seems off that credit score would not matter. Before I purchased a home I was a renter and there was a big difference between me (with low credit card utilization, no deliquencies, etc.) vs. a deadbeat who doesn't understand personal finance. Moreover, some financially responsible people choose not to buy or have not yet saved enough for the down payment on a home they want. It doesn't mean they will have poor credit reports.

Maybe the story is different in Memphis, not sure. That said, good credit would be more important than high income in this case. You are right that someone with great income and good credit would likely be owning. =)

@Chris Clothier,

Thanks for your reply. I am quite familiar with your turnkey operation as I have done some research on reputable providers and your names often comes up for Memphis and some of your other markets. Kudos on building a great rep!

My concern is that the TK does not necessarily have the same goals as the owner. For example, a TK may look to get market-level rent which may net more CF in the long-run but may lead to more vacancy and worse tenants than below-market rent where the owner could have their pick of tenants (and pick the one with the best risk profile).

Moreover, and I doubt your TK company does this since you have a good rep, you can imagine a TK provider just getting a tenant in the door quickly to be able to advertise having a high-rent tenant already in place, even if that tenant may have a lower propensity to pay on time each month over time.

So the interests do not always align. Granted, over time interests do begin to align since a bad reputation will not help the TK company succeed in the long-run. But at the end of the day, it would be nice to have some more control and be able to say "I'd rather lower rent and get a high-income, high-credit score tenant with no bad history" rather than to just "trust" the TK company.

Hi guys,

I am getting ready to invest out-of-state since I am focusing on buy-and-hold positive cashflow properties and I live in NYC, which isn't good for that kind of thing. I am fully willing to accept a lower CoC return by doing turnkey (higher purchase price, PM fees, etc.), as that is the convenience I am paying a premium for. Would hire my own home inspector/appraiser/lawyer, etc. so not too many concerns there either.

Where I am VERY spooked is in the tenant screening process. I much prefer to do this myself as I have a background in credit risk/finance and am a decent reader of people. I would much prefer lower rent and a more stable, responsible tenant. I am willing to accept lower returns for lower risk in terms of cash flow fluctuation.

However, it seems that all the TK companies I research already provide a tenant. How have you guys dealt with this issue? Do TK companies allow the owner to get heavily involved in tenant screening - if not for the original in-place tenant, then at least for subsequent tenants? 

Thank you

Hi Jon,

Thanks a lot for your feedback. I've found differing perspectives on the web from the 45-50% you mention to more conservative estimates such as 36% or even lower.

So do you think the major large bank lenders would be okay going to 40-45% as well, or is it better to try to build relationships with smaller regional banks/CUs once the DTI gets high?

Thanks!

Hey guys,

I own my own place in NYC with a hefty mortgage payment and building maintenance/tax fees etc. I have no other debt.

Currently my DTI, if I include the mortgage and the full maintenance monthly fee for my building (which includes my property taxes) is 24%. I can probably squeeze out about $700 more of second/third mortgages before I hit 30%, if I assume my rental income will not be counted at all..

That said, is 30% DTI kosher? Will I be able to find lenders who want to loan to me (out-of-state, btw)? I have excellent credit, etc. etc. The gorilla in the room here is the notion of selling my apartment and unlocking a good chunk of capital to play with without worrying about lender's turning their nose up at my DTI. But right now, I do not want to sell so am trying to understand how much leeway I have.

Short Version: How high of a DTI can I be at until lenders will stop providing me conventional loans for rental properties, assuming an 800 FICO score?

Thanks guys. Just trying to set some realistic early goals for myself and the first step is understanding how much leverage i will have to play around with before I have to consider liquidating the assets I am currently sitting on.

Thanks Michael, I appreciate the feedback. I am pretty sure that both the rental income and expense assumptions are conservative, but I prefer to err on the conservative side. Seems a lot of people assume they can make 15-20% a year on passive real estate, but I would be happy with 5-8% given I am looking at a turnkey or property-managed approach. Want to make this as passive as possible and am more than willing to pay a premium for that.

Hey guys. I am kind of an Excel nerd and spent some time putting together a cash flow model for passive (with a property manager) rental properties. Can you guys please review my math and let me know if there are any "blatantly wrong" assumptions or missing big-ticket line items? The numbers below assume a cash purchase. I know a lot of my assumptions are conservative. Thanks!

Vik

Hi all,

I am a 30 year old guy from NYC looking to slowly transition from a salaried income to a real-estate income via rental properties. I am very well-versed in finance and financial modeling so this stuff is very fun for me to think about, but my only practical experience is buying my own apartment a couple of years ago. I'm sitting on about $150K of liquid assets at the moment, but could move some things around to get to $300K or so if I saw opportunities. My goal is to have $50,000 in annual rental income within 7 years. I think I can make more in the stock market, but I am very focused on early retirement and therefore am more interested in low-volatility income than "high-risk, high-returns". Goal is a consistent income within 7 years, not maximum assets after 40 years.

What I know best is the New York City rental market, so I was planning on getting started with single apartment units or single-family homes in the city and surrounding areas, including Connecticut which I also know well. 

I know that Manhattan and to a lesser extent the outer boroughs have very low cap rates compared to other locations in the US. This sucks, but it leaves me with a choice of a market I know with low returns or investing out-of-state and getting higher returns at higher risk. I would like to get a true 4-5% cap rate if possible (including taxes, maintenance, insurance, utilities, vacancy, etc.). 

What I would love to connect with some of you on is:

• Are there any good resources on small-scale real estate investment for income in NYC? It seems to a be beast unlike any other, particularly due to the predominance of co-op buildings.
• Is a 4-5% true cap rate attainable in NYC?
• What are average property manager fees in NYC, if I go that route? Is a 3-4% cap rate still possible using a management co?
• Which neighborhoods are good bets? From what I have researched, within Manhattan the UES seems best for price-to-rent ratio.

Thank you. I hope to be able to add value to the forum as I get settled in.

Cheers,

Vik