All Forum Posts by: Account Closed

@Ned Carey I ask because I’m full of humility. While I’ve spent years developing this strategy, I realize that I have everything to gain by learning from others. 

I’ve considered investing out of state in areas with drastically lower price to rent ratios as a way to further hedge toward cash flow. I’m of the opinion that collective modest cash flow that fluctuates violently across different investments is acceptable, if not more desirable, if it allows for more opportunities within appreciating markets. 
 
Im hoping someone can pinpoint my fatal flaw so that I might correct it before it’s too late!

Thanks @Ned Carey  I agree I have made some assumptions that may or may not pan out. Perhaps it would be beneficial to put some numbers to it. 

The 4 year lease with a good tenant is the “safety blanket” in my mind. His monthly payments alone are paying $600/month against my principle on a $350k home. At 2% appreciation that’s another $7k per year in net equity. At the end of his lease term I project to have $140k in equity and intend to sell absent another long term lease to secure my cash reserves for future traditional investment methods.

The short term rental is netting $6k profit in 3 months this winter, with my projections to be upwards of $10k for the year above PITIA and maintenance. I do understand the legal trade winds surrounding STR, and am trying to capitalize before they shift directions.

In this case the billionaire has brought in another anchor to the shopping center, and has announced plans to bring a major entertainment venue to the area. I tend to follow the institutional investors regarding the areas I’ve selected. I should also note that I’m looking at buying the cheapest house in the development which spans values from $350k to $750k. 

In my perspective the largest risks to the growth investments Ive made is not having the cash to carry them in a downturn. The cash flow of the STR is meant to mitigate that risk. The exit strategy on the first property is also meant to serve as a safety net to the cash reserve issue for the future.

Assuming I am ok with the risks taken here, what can I do to further hedge my bets?

Whit

I’m curious to find out if their are other BP members who have adopted this kind of strategy. I’ll caveat but saying that I have a few primary goals that are driving this strategy so bare those in mind.

Goals:

1. Be hands off. I don’t want to run C- properties that require a lot of maintenance.

2. Be hands off. I don’t want problem tenants who have issues making rent or who need to call me constantly.

3. Be hands off. My ultimate goal is to make money while I sleep, not to lose sleep in order to make money.

4. Be hands off. I don't want to flip, BRRRR, or otherwise perform value add upgrades. I value my free time.

5. Be hands off. I don’t want to spend my weekends pulling weeds at a property or mowing the lawn during vacancies.

As a new investor I was not flush with cash. I had maybe $15k and a good job. I bought my first house in a great area with good schools, lots of amenities, and nearby developments. I dumped as much cash as I could into it for 2 years. As luck would have it I’d go from 5% down to 25% equity in a matter of 2.5 years. At that point I decided to turn it into a rental. It’s near a hospital and I was lucky to find a physician starting his 4 year residency. I locked him in on a 4 year lease at just under market rate. The house does not cash flow (because I put 5% down), it breaks even but I’m 18 months into the rental now and I’ve heard from the renter exactly once. He has paid 3-7 days early every month so I’ll chalk the first one up as a win against my goals.

With that safety blanket in place purchased a condo where I currently live. This time I hoped to turn it into a VRBO for 3 months out of the year. The winters in Phoenix can easily net 2-3x my mortgage per month. I’ve locked in a renter this winter from December to April for a cool 2.5x my mortgage. I’ll soon be up against a deadline to move out so I’ve begun to look for investment property #3.

On #3 I’m looking at purchasing it as my primary and living there for a year or 2 to satisfy the loan terms. I’m targeting a new masterplanned community and would be one of the first to pull the trigger in the neighborhood so I expect some growth as construction costs continue to rise, the other phases are developed and net migration to Phoenix continues.

This whole strategy of locking in a long term, diversifying with a long term STR, and the upside of being first into a masterplanned community is not discussed much at all on BP and I have to wonder why. My purchases are primarily focused on the above five mentioned goals. The first property is targeting growth in a growing area, the second is targeting cash flow that the first does not provide, and this third prospective investment is again targeting growth 1 block from a shopping center just purchased by a billionaire RED in AZ.

Is anyone else utilizing this kind of growth, cash flow, growth, cash flow alternating strategy? I would welcome any criticism, tips, etc.

@Allan Brooks the market in Phoenix is widely varied being that it’s a huge metro. I’ve seen cap rates on MF anywhere from 4-10% depending on the area, age of building, etc. If you have specific questions about an area I’d be happy to help. I have some great resources for determining market rents.

Disclaimer: I am a real estate agent specializing in North Scottsdale. 

Hey @Ryan Judah. I'm a realtor and investor in the Scottsdale market. I own both a buy and hold rental in Desert Ridge and a STR in Greyhawk. It's an interesting market with all the job migration lately. The expansion going on near the 101 from Hayden to Tatum is something I am particularly interested in (as I have some skin in the game there). I'd be happy to help you analyze anything that you are looking at. I have some great resources to tap into market rents and market activity. Best of luck!

Whitney

@Trevor McCloskey I would not use the active listings as your comps, I would use closed listings. If you need help running those comps feel free to DM me. You could also put the rental on the MLS and pay a $200 finders fee to the agent who brings a renter.

I agree that letting them in alone in a recipe for disaster.

@Jared Smith houses in Phoenix and the surrounding areas lost better than 50% of their value during the Great Recession...I should know...I live there. I don’t think it’s responsible to say otherwise.

@Axel Meierhoefer I just sent you an email.

@Jason Leavitt Thank you. My current interest rate is 3.25%. It was a primary home that I paid points on and then converted to a rental so I am trying to steer clear of a a full cash out refi. Any suggestions you have on an investment HELOC would be appreciated! What kind of rate should I expect with a 790 credit score?

Hey BP. I am looking to make that jump to my second rental property and hoping to get a little advice from the community.

Here is the scenario. I owe $250k on my first rental property and it's worth $360k. I could cash out refinance and leave 20% equity (to avoid PMI) to create a new loan of $288k leaving $38k minus the cost of the refi ($6k??) or $32k cash. My plan would then be to buy a 4plex and live in one of the units for a year putting all that money down and using the commission id earn as the buying realtor as my new cushion (3% of purchase).

My question is...given that debt to income ratio will be a huge factor in all of this and I'd like to maximize my buying power...would you recommend a HELOC (hard to find on investment prop), Cash Out Refi, or a personal loan. What's the next piece of the puzzle in all this that I am missing and should be considering. Which option is going to allow me to easily tap into equity again in a couple years to buy another rental?

$92k W2 income

Monthly Debt = $560 car + $200 CC + 100 (net loss on rental from schedule E)

Before you criticize that I’m operating my 1st rental prop at a loss, consider that it’s an appreciation investment that’s increased $70k in the last 3 years (while losing me $100 per month in cash flow) and paying $550 per month against the principle.

Please HELP!!