All Forum Posts by: Adam Smith

@Rhonda Green I agree with @Jonathan Towell that a HELOC used wisely could be a good option. If you can get a HELOC, make other investments and have the cash to pay them off relatively quickly then that might be the way to go.

I also agree with @Timothy Aughinbaugh with the fact that paid for rentals is less risk.  As mentioned you will sleep better at night.  You will not get grief from me Timothy, this is something that every investor needs to consider in my opinion.

I think it just comes down to managing your risk, your income and debt.  You will probably get a lot of different opinions but it comes down to your person situation.

Personally, we have a rental with a mortgage and HELOC on our personal home, but the HELOC will be paid off this year and we have a lot of "extra" income/savings if anything were to happen.

Good Luck!

@Robert Hastings We were looking at a second rental and our loan officer, which is at a local regional bank (and is awesome) said they would count 75% of the rent minus mortgage until we had two (2) years of tax returns on our current rental.  After that they would look at the profit from the tax returns.  He even said that he could count 75% of the "profit" on our new rental that we were looking at purchasing to help in qualifying.

We have purchased one property with him but my wife is a realtor and has dealt with him on multiple deals.  He is very knowledgeable and on top of everything.

I would suggest talking to multiple loan officers to see what they can offer.  It has been my experience that the local or regional banks have a little more room to adjust for repeat clients.  Not sure if this is really true or not but this has been our experience when calling national mortgage companies.

Good Luck!

@Bill Hernandez Welcome to BP!  There is a lot of information on the site.  Make sure to set up keywords so you know when new posts are made on your market.  St. Pete is great.  Plan to end up in FL in another 10-15 years!

Good Luck!

@Tyler Price Welcome to BP.  There is a lot of good information to soak up!  The first thing we did was to learn as much as possible.  Then when you find a good deal you will know it!

@Paul Hormann We only have one rental SFR but we give them a gift card for Christmas and let them know that we appreciate the on-time payments and taking care of the house as their own.

@Yosef Leibovitch In our area we look at Craigslist to see what is available and for what cost.  This doesn't mean it will rent for that though.  We have called and talked to the landlords in the area to see if we can get any additional information on the rental price (i.e.-if they are willing to lower the price).  If you don't want to call then at least watch craigslist everyday to get feal for how long properties on "for rent" based on how long they are advertised. 

You can always keep a running list of properties that are listed on CL and when they are removed call them and see if they rented the property and if so at what rent.

Good Luck!

@Brandon Hall Thanks for the explanation and a great discussion!

Thanks again.

@Brandon Hall  Thank you for the detailed analysis.  I tried to follow the numbers but got lost somewhere.  Below are my questions:

1. I calculate a payment on a 9k loan at 2.85% for 60 months to be $161.12/month.  The interest paid for the term of the loan would be $667.14.  Therefore the interest plus loss of equity is $4,667.14.  This might make the argument stronger for the loan depending on what you think of #2 below.

2. In the car loan option you have a car payment and cash to invest.  In the pay cash option there is no car payment therefore to compare "apples to apples" wouldn't you have to consider investing the $161.12/month that would have gone to a car payment in the cash option?  I guess the way I look at it (which could very well be wrong) is in your example Colin has $10k cash and $161.12/month available for a car payment.  Is it better to get a loan and invest the cash or pay cash for the car and invest the car payment. 

$161.12/month invested for 60 months at 8% interest would be $11,838.59 at the end of the term.

If my numbers are correct I still think the end result is the same.....I think.

Thank you for the detailed analysis and explaining it in simpler terms.  I am looking forward to your insight.

Thanks!

@Muks M. For my wife and I we would sell......see the reasons below.  I think you mistyped the purchased price based on your last two posts.  Either way if you have $100k spread between selling price and mortgage it will be less as you stated with commissions, closing costs, etc. it would still be ~$70k-$80K in cash.  I am curious if 5 months holding is reasonable?  That seems long but I don't know the local market.  Around here if houses are priced correctly they don't sit on the market for more than a few weeks and close within 30-45 days of getting a contract.

Back to the original question, I think it just depends on your goals, market and what you would do to reinvest the money from the sale of the townhome.  I know this is a vague answer.  I know what I would do if I had ~$70k in cash, I would purchase two rentals (with a little more cash from savings) that would cash flow $500-$700/month each (and have principle paydown).  This is exactly our plan, one more house in 2016 and one more in 2017. 

I can only answer questions with "what would I do" and I would not rent out a negative cash flow property for the reasons from previous posts.

To make things more complicated......in 2012 we decided to sell our primary house and not rent it out because it would have only cash flowed $200/month and this would have been our first rental.  Now 3 years later we are kicking ourselves because the value has gone up ~$60k in the past three years!!  We made the right decision for us at the time with the information we had (prior to finding BP).  The increase also has to do with our area and I don't know your area.

I agree with 15-year mortgages but only if it is a really good deal where the cash from the property can at a minimum carry itself or you are in a position to feed it (and every other part of the deal makes sense).

Do your research (which you are doing), make a decision and stick with it.  I am sure your decision will work out no matter which way you go!  Either way you will learn.  Each market and situation is different, so take in all the different opinions, analyze and make a decision that works for you.  (i.e.-what works for us in our market may not work for you in your market).  Maybe not a lot of help but just our perspective.

Good Luck and keep us updated on what happens!

We only have one rental but last year we did get our tenants a Christmas card and plant.  This year we got the new tenant a Christmas card and a gift card.  We want to treat our tenants how we would want to be treated, fair but with a firm hand. We also pride ourselves on excellent customer service as well.  It is our opinion that a little thoughtful gift at Christmas will remind the tenant that we appreciate the on-time payments and taking great care of the house.

I think the question of whether or not to get tenants a Christmas gift also depends on the type of tenants you have and the class of rental.  In our case we have two professional upper middle class tenants.