All Forum Posts by: William S.

Seems there’s confusion. See below.

Purchase price = $87,500 (25% down at 4.75 interest rate)

Rehab = $35k (this may go up to $50k, these homes need a lot of work)

Closing = $2,000

Rent = $1,450/m

Mortgage = $342.33

Taxes = $300

Insurance = $50

Vacancy = $120.83

Maintenance = $50

CapEx = $180

PM = $145

Lease Fee (1yr) = 41.67

Net Cash Flow = $220.17

My out of pocket cost = $58,875

mortgage amount is $85k purchase. The problem is the high rehab costs ($35-$50k). Any creatives ways to put 1/2 of the rehab amount on some sort of loan?

Taxes are high though $300/m roughly

Rents are $1,450 - $1,550

They’d be leverage at a purchase price around $85k 25% down 30 year fixed, but take $35k or more in rehab costs. All in around $60k = $200-$250 Net Cash Flow (using highly conservative estimates). After repair values of $150k-$160k or a little higher.

I don’t see a point in not using leverage for rentals. If I felt like I had too much leverage I would just buy some dividends at that point...

I’ve seen on a few FI blogs where those who have achieved as little as $2k/m in income decided to move to inexpensive parts of the world. Southeast Asia for example.

They may live only off the income, but also has some emergency savings and may work remotely.

Anyone done this? Share your story.

I’d be up for doing this for a year or so, but I’d want to come back and keep working.

I’m in a market where I can buy a fixer for $85k or so but needs anywhere from $35k-$50k in rehab. Basically I’m all in for $60k...

$60k = $450/m cash flow (Mortgage, Taxes, Insurance, PM) 

* I know there’s maintenance costs but leaving it out just for this example. I’d end up around $200/m...

$60k...That’s a lot of cash that I need each time...

This area is desireable and has very little competition so I like that. It also has nice modest appreciation.

I know some may say to BRRRR but the net cash flow is $0/m if I get close to taking my cash out. I'm also a conservative investor. I like leverage but there's a point with me. I also don't want a lot of homes. I don't want to wait until the 30 year loan is up to collect cash flow...

I have 1 rental in this area and it’s done very well. I want to keep buying but the numbers are not as favorable. It’d take me 3 years to save up $60k too.

Does this market make sense anymore for rentals? How do build up cash for down payment/rehab money?

I know when I get to 5 rentals things will snowball, but in the beginning it’s tough to get the ball rolling...

I’m not interested in lower end rentals. It won’t work out in the long run. Too many problems in those areas.

My plan was to buy 3 in this area. Higher rental rates, good area, nice appreciation. After 3, take the funds and purchase strictly cash flow rentals or buy dividend stocks. However $60k is A LOT for me. Any suggestions on how to reach 5 in a more efficient way?

After running some numbers it still works. Rehab budgets would be $35-$40k with purchase prices ranging from $80-$90k. I wouldn't receive all of my cash back. It would cost me roughly $17k per brrrr.

I have one SFH rental in this particular neighborhood that has performed well. I bought it below market value, put in $8k worth of work and have good cash flow + appreciation. In less than a year I have had $22k give or take in appreciation. Since I am wanting to grow and preserve my capital I want to brrrr going forward, but I'm not sure it makes sense.

In this market today we are at $160-$170k ARV for a completely done property and rents are $1,450 to $1,650, depending on square footage, etc. This area also has fairly high taxes $3k-$4k/yr. So the 1% rule doesn't work due to higher taxes, more like 1.25% here.

If I want to pull out 100% of my investment, or as close to it my net cash flow will be $0-$100/m at best.

I'd like to brrrr to 10 SFHs. Rent them out for 5-10 years. Realize some appreciation gains, then sell 5 and use those funds to payoff the remainder 5. With the ARV to rent ratio where it is at does this make sense to do?

@James Babb

There are a couple of things to think about in terms of repairs.

1. When items break all of a sudden (emergency)

2. When major items need replaced in X amount of years.

For #1 think of a major item that could break out of nowhere and that is your budget.

For #2 there are a few approaches. See below.

• % of gross rent. I would not recommend this! If your rents are $600/m and you set aside 5% you will not have enough when the time comes. Stuff costs X amount of $ not percentages of an income
• Small portfolio (this is where I'm at now)
  • $10k per SFH + $150-$200 for CapEx/m. I built a spreadsheet of all major items and when they will need replaced. That is where $150-$200/m (30-year hold) comes from. HOWEVER, I am reinvesting this money into more properties over the next 5-years. I am in my growth stage. See below.
• Large portfolio (where I am going)
  • Once you scale, you have a lot of income coming in per month. If you have 20 rentals and 1 needs a new roof, you have income from 19 to pay for the 1 roof.
  • I will still have a certain amount of reserves in cash ready if needed, but instead of a per property basis, it will be to cover the portfolio as a whole.

More experienced investors please chime in...

Note: I have been investing for 1.5 years and have 4 units.