All Forum Posts by: Will C.

@Will C., @Michael Ealy, @Preston Quinn, to illustrate my point imagine two potential investments: 

• Both will rent for $1500/month. 
• #1 is bought at FMV for $150k (hitting the 1% rule),
• #2 is BRRRRed for an ARV of $200k, refi is for $150k (meeting your 1% rule)

Expenses are the same:

• $150: Management (10%)
• $120: Vacancy (8%)
• $112: Repairs (7.5%)
• $112: CapEx (7.5%)
• $150: Property Taxes
• $75: Insurance
• Assume utilities are billed to tenants

=$719 Total Expenses

Cashflow for #1: $177/month

• $1500 GSR
• - $719 Expenses
• - $604 Debt Service (5%, 30-yr, 25% down)

Cashflow for #2: ($24)/month, that's negative

• $1500 GSR
• -$719 Expenses
• -$805 Debt Service (5%, 30-yr, 25% equity left in deal)

Of course, you have $50k of equity in #2, which is awesome, but the 1% rule is used to determine if a property will likely cash flow as a buy-and-hold rental. The example above illustrates why using ARV is preferable for that purpose.

Thanks @Brian Beck and @David Wong,

My reasons were heavily based on my employment being right outside of Baltimore, and my family being there. 

However, I think it's a good move in the market right now as well. I've been watching the Baltimore market very closely since I came overseas in October, and the property prices have been steadily declining. 

I analyze about 5-6 deals a week to keep fresh and informed, and when I started almost nothing made sense for the house-hack I'm trying to do. A few months ago I started seeing more deals make sense, and now there's enough of them to justify shopping around and making a move. 

Generally, the rents in Fed Hill (where I'm buying) are between $700 on the LOW end, and $850-$900 on the higher side per room. 

My plan was to find a 2 or 3 BR property that had a finished basement that I could use as a BR, while renting out the other rooms. There are plenty of townhomes in downtown Baltimore with this, and a TON of them are misrepresented on Zillow/Realtor.com as they won't have the basement square footage listed, or they'll have a very large BR somewhere that could be made into 2. 

Richmond, on the other hand, has cheaper prices per room. Generally by $100-$150 dollars per room cheaper. The housing prices are also much higher in comparison, since Richmond is more "up and coming" with a very hipster scene, so tons of young professionals are flooding in (similar to Nashville and Austin, but a bit more in it's infancy). 

There are definitely opportunities, my best friend who is out here with me just entered contract on a fantastic 5BR SFH that they're turning into a 6BR, and should be able to cashflow well on. But they'll have some risk with trying to fill that many rooms, as well as a decent rehab budget to make it work how they want it to.

@Akeem Moreno

I would save more and keep educating myself.  Get rid of that credit card debt too.

When you find a opportunity and have a solid strategy in place, pull the trigger.  You will also be well capitalized.