All Forum Posts by: Wade G.

You made a mistake in the very beginning by unclogging the toilet.  My lease states the tenant is responsible for plumbing clogs unless the clog is caused by faulty plumbing.  When a tenant leases from me, I make sure they understand that there are no clogs in the plumbing when they receive the house so any clogs will be caused by them and they are responsible for calling a plumber and dealing with it.  

ARV 260k

Repairs 30 - 35K

Asking price 185K

I used to buy deals like this but rates were lower and I'm not sure it's worth it anymore. Stable middle class neighborhood, rents $1700 - $1800, 3/2/2, 1800 sq. feet, 1980's build in Houston, Tx suburb. Hard money route with conventional refi at 70% LTV puts PITI at around $1700 so no cashflow (so doesn't make sense to do that). Skipping hard money route and putting 25% down plus repairs would be close to 80k out of pocket and break even cash flow (also doesn't make sense). Curious if this is comparable to what people are seeing out there?

@JD Martin, @Theresa Harris Selling it is what makes the most sense to me too, mainly since family is involved, and they don't have any money.  Sort of tough for sentimental reasons but also a 3.5% loan on an investment property is tough to let go.

My dad passed away the house has been left to me and my two sisters.  My idea is to do one of two things, sell the house and divide proceeds three ways, or buy out my sisters and keep as a rental for me.  Problems are that family is involved, and the house would not cashflow very well, actually probably be negative after vacancies and repairs are figured in.  Numbers are as follows:

- Loan has 14 years left @ 3.5% (is a 15 year term fixed)

- Loan amount is 138k

- house will need 30 - 35k repairs

- current value is approx. 180k

- repaired value approx. 245k - 250k

- PITI is about $1,550 a month

- rental comps are about $1,650 - $1,700

So obviously not a home run as a rental.  As the successor I can assume the loan.  Considering current investment interest rates the loan is advantageous other than the 15 year term, I like 30.  Thought about possibly owner financing it too.  I'm not new to this, I have had rentals for almost 20 years now.  Cash flow wise its no good, but equity should accrue quickly.  Considering current value I would pay my sisters 15k each.  So I would be out of pocket 30k for repairs and 30k sisters buy out, so at least 60k.  That is a very steep loss of cash for basically no cash flow.  Then there is also the possibility of my sisters not being happy when the house is worth north of 300k in 10-15 years.  In my market appreciation is still strong but with rising interest rates this may be our last crazy summer sellers market.

Guess it depends on who the lender is.  Last time I used hard money was 2018.  Terms were 9.99% for the first two months then it jumped to 12.99% for the remainder of the loan, I think up to six months if I recall correctly.  I refinanced out before the end of the first two months. 

Yes, anytime I have used hard money I have paid for repairs with my own funds.  I never liked the idea of the lender giving me the money for repairs on draws and the having to get the repairs inspected along the way.  That is just a hassle that slows me down.  By the end of the first month I am preparing to refi out of the hard money and into fixed rate term.

Oddly enough a couple of years ago I recall Pasadena, Tx being rated as one of the best cities in Texas for Airbnb ownership.  It's not an inner city trendy metro area or a vacation area so I was surprised to hear that statistic.  I have no idea why, maybe the short term reoccurring jobs in the petrochemical industry has something to do with it.

I have run numbers trying to decide if holding SF properties is really worth the hassle and time compared to just investing in hands off investments like mutual funds or syndications.  For instance I have one property I am considering selling.  I bought the property in 2012 for 71k.  I spent 23k out of pocket.  I can now sell the property for 220k.  I would walk away with about 110k after paying off the mortgage, realtor fees, taxes, depreciation recapture, and other small expenses to sell for retail value.  For me the only return I care about is how much I walk away with on the initial investment of 23k.  I don't factor in CF because that just pays for ongoing repairs, maintenance and vacancies.  So roughly the return is about 19% when considered over 9 years.  I understand there are other calculations that can be used to determine the returns but I am trying to use the same scenario as if I just placed the 23k in a mutual fund.  Is this the proper way to think of returns or am I missing something?

I have thought about this a lot lately as I have gotten older.  I have run the numbers on the amount of money I have invested in RE and compared that to if I had invested that in a stock portfolio earning 7% over the same number of years.  The RE comes out considerably ahead but at a heck of a cost.  When I consider the time, effort, hassle, and stress I'm not so sure the RE has been worth it.  As I get older I value my time more and more and having to give up a Saturday dealing with RE issues is not something I want to do anymore.  Personally for me the shine of RE has worn off.  Having said all that, it may also come down to the RE investing strategy you choose.  I chose to invest in 3/2/2 rentals in middle class neighborhoods.  After over 15 years I just have not found that strategy to be lucrative enough to justify the loss of time, the hassle, stress, and the enormous amount of effort.  Perhaps a different strategy (or a smarter person making decisions) would prove to be lucrative enough to justify the negatives.

For me I don't mind the risk of leveraged rental properties but I don't like taking any risk with my primary residence.  For some reason I'm kind of thinking about it like a stocks and bonds portfolio.  When stocks have done well financial planners seem to recommend rebalancing and taking some gains off the top and adding to the safer bond investments.  That is kind of my line of thinking.  Pulling equity out of the leveraged rentals and paying off the primary.  Then if all goes to heck at least I conserved some gains in a safe place and added to my cash flow by getting rid of the principal payment on the loan.  Once that has been done then buying more rentals and taking more risks won't bother me in the least.  Loosing everything is not something I could stomach having to rebound from.  It takes too long to rebuild (at least with my knowledge and time).  

Having said all that, I recognize the opportunity cost of having a house with 275k of equity just sitting there earning the meager rate of inflation minus all the maintenance costs.  Plus refinancing money out of a rental and paying off the primary has tax consequences of not being able to deduct all the interest form the new rental mortgages.  Another con is I have no heirs so with that in mind financial independence with cash flow makes more sense to me rather than passing on paid off properties. 

These life decisions wear me out mentally.