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Author Topic: Young investor needs advice!  (Read 7921 times)

Offline gpenyak

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Young investor needs advice!
« on: September 11, 2013, 10:12:10 pm »
An opportunity has presented itself to me to purchase a second property in the condo complex that I currently live in.  I bought low on the current one I'm in back in 09 - 130k (value around 160k currently) - rental rates are great here for my current unit, around 1300/mo.  This would cover mortgage, taxes & ins., and monthly HOA, while running a cash flow of around $100./mo.
The opportunity for a second condo I have contracted for 145k, - value on it is 185k (very conservatively),  current owner paid 255k in 07.  Selling it at a great loss through a relo company due to his job.  This would be my new primary residence.
Here's my thought process - hold current unit and rent it (other than selling it and pulling out my equity).  Buy this second unit, combine the equity in both and open a line of credit for the future to help acquire other rehab properties.  Is this possible?  Or a, I better off cutting my debts and selling my current unit.  My income is around 75k a year, I have student loans I am still paying on.  So holding both properties with no rental income would be somewhat tight if there was no rental income.  Any advice from seasoned investors would be great, love all I have learned from this site.
« Last Edit: September 12, 2013, 06:28:19 am by gpenyak »

Offline davewindsor

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Re: Young investor needs advice!
« Reply #1 on: September 12, 2013, 08:54:03 am »
An opportunity has presented itself to me to purchase a second property in the condo complex that I currently live in.  I bought low on the current one I'm in back in 09 - 130k (value around 160k currently) - rental rates are great here for my current unit, around 1300/mo.  This would cover mortgage, taxes & ins., and monthly HOA, while running a cash flow of around $100./mo.
The opportunity for a second condo I have contracted for 145k, - value on it is 185k (very conservatively),  current owner paid 255k in 07.  Selling it at a great loss through a relo company due to his job.  This would be my new primary residence.
Here's my thought process - hold current unit and rent it (other than selling it and pulling out my equity).  Buy this second unit, combine the equity in both and open a line of credit for the future to help acquire other rehab properties.  Is this possible?  Or a, I better off cutting my debts and selling my current unit.  My income is around 75k a year, I have student loans I am still paying on.  So holding both properties with no rental income would be somewhat tight if there was no rental income.  Any advice from seasoned investors would be great, love all I have learned from this site.

Sell the first unit for the $20K profit ($30K minus realtor and legal fees) and save that as a downpayment for something larger that generates more positive cash flow.  You've made a profit on the sale, which is smart money. You did well.

$100/month is not enough to keep it.  It doesn't address turnover costs.  Say you get a deadbeat tenant or for some reason the tenant lost their job and had to move out.  If you're out just a month in rent in one year (which is a very conservative loss--usually you have to at least repaint a $1,300 apartment), you've lost any gains.  Throw in new carpet and now it's getting more expensive.  If you had something larger like a triplex, you could spread out your losses.  $100 a month for one property as a best case scenario is not worth it.

The second condo sounds like another good fix and flip property to get you closer towards a downpayment on a larger building, so go for it.  Historical cost means nothing.  But if you've done your research and can flip it for $45K more, then do it and live in it until you can sell it.

Forget about helocs and go for fixed terms and put the extra in a bank account to use as a downpayment on another property.  Helocs are like credit cards.  Use more than a third of the Equity with a heloc and your credit score goes down, whereas, regular mortgages usually don't report on your credit score.  If I were you, I'd be trying to leverage for as much as the income on your properties would still positively cashflow.
Landlord and investor

Offline remaxmgm

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Re: Young investor needs advice!
« Reply #2 on: September 16, 2013, 06:10:05 am »
Owning your own home is everyone’s Dream. And that dream is more alive today than ever before. With rising prices and increasing number of options available home buying has become a complex process involving a lot of money at stake. It’s your real estate ownership experience, and buying a new piece of real estate is just the beginning.
« Last Edit: September 16, 2013, 06:36:22 am by kdhastedt »

Offline gpenyak

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Re: Young investor needs advice!
« Reply #3 on: September 16, 2013, 08:08:34 am »
An opportunity has presented itself to me to purchase a second property in the condo complex that I currently live in.  I bought low on the current one I'm in back in 09 - 130k (value around 160k currently) - rental rates are great here for my current unit, around 1300/mo.  This would cover mortgage, taxes & ins., and monthly HOA, while running a cash flow of around $100./mo.
The opportunity for a second condo I have contracted for 145k, - value on it is 185k (very conservatively),  current owner paid 255k in 07.  Selling it at a great loss through a relo company due to his job.  This would be my new primary residence.
Here's my thought process - hold current unit and rent it (other than selling it and pulling out my equity).  Buy this second unit, combine the equity in both and open a line of credit for the future to help acquire other rehab properties.  Is this possible?  Or a, I better off cutting my debts and selling my current unit.  My income is around 75k a year, I have student loans I am still paying on.  So holding both properties with no rental income would be somewhat tight if there was no rental income.  Any advice from seasoned investors would be great, love all I have learned from this site.

Sell the first unit for the $20K profit ($30K minus realtor and legal fees) and save that as a downpayment for something larger that generates more positive cash flow.  You've made a profit on the sale, which is smart money. You did well.

$100/month is not enough to keep it.  It doesn't address turnover costs.  Say you get a deadbeat tenant or for some reason the tenant lost their job and had to move out.  If you're out just a month in rent in one year (which is a very conservative loss--usually you have to at least repaint a $1,300 apartment), you've lost any gains.  Throw in new carpet and now it's getting more expensive.  If you had something larger like a triplex, you could spread out your losses.  $100 a month for one property as a best case scenario is not worth it.

The second condo sounds like another good fix and flip property to get you closer towards a downpayment on a larger building, so go for it.  Historical cost means nothing.  But if you've done your research and can flip it for $45K more, then do it and live in it until you can sell it.

Forget about helocs and go for fixed terms and put the extra in a bank account to use as a downpayment on another property.  Helocs are like credit cards.  Use more than a third of the Equity with a heloc and your credit score goes down, whereas, regular mortgages usually don't report on your credit score.  If I were you, I'd be trying to leverage for as much as the income on your properties would still positively cashflow.

Dave Windsor, thanks for the advice!  Great stuff!

Offline marbellaproperty

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Re: Young investor needs advice!
« Reply #4 on: October 24, 2013, 03:09:03 am »
nice! awesome  :rolleyes

Offline campbellsimon

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Re: Young investor needs advice!
« Reply #5 on: October 24, 2013, 01:55:45 pm »
I have to agree here. It looks like these properties are better as a fix and flip than a long-term investment opportunity. If you can take the equity and put some in the bank to use as a down payment on other good deals and use the other to pay down your school debt then you will free up more monthly income to qualify for other mortgages.

Additionally, it is very difficult to get a HELOC on an investment property.  Also, your first mortgage was written as a owner occupied unit. The second loan will no doubt need to be written up as an investment property which will carry a higher interest rate and lower your profit margin.  Just something else to consider.
Simon Campbell - Business Analyst

Offline travistane

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Re: Young investor needs advice!
« Reply #6 on: October 30, 2013, 04:28:03 am »
Learning to invest is hard enough. Now try doing it during the worst recession in a generation and the biggest financial crisis in a lifetime. If you’re a young person with money to invest, however, you can consider yourself lucky. You have income at a time when the jobless rate is rising rapidly. If you’re just starting out, you avoided – so far – huge losses of the sort that drastically changed the retirement plans of many baby boomer parents...


Quoted from http://saleshq.monster.com/finance/articles/1693-advice-for-young-investors
« Last Edit: October 31, 2013, 06:37:09 am by Mdhaas »

Offline javipa

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Re: Young investor needs advice!
« Reply #7 on: October 30, 2013, 06:54:26 pm »
travistane, I have more faith in the voters than to believe they'll vote more of this progressive horsesh*t on themselves in 2016.

We've got 36 more months to endure.  That gives the sophisticated and aware investors three years to get control of as much real estate as possible. 

I believe that once we're out from under both this incompetent, liberal ideologue, and his cronies, that we're gonna see a generational spike in growth in every way, including real estate values, rents, incomes, appreciation and wealth recovery.  Or we'll implode.

If we implode, than what difference does it make? 

Most everyone's going down, but we can take advantage of yet another opportunity; even more bargain real estate.

For example, the knowledgeable and sophisticated investors, during the depression (the ones who knew how, and where, to get private money, and how to evaluate a deal) made a killing, as they invested when conventional wisdom said otherwise. 

Many millionaires were made as they came out of the depression, because of the decisions they made DURING the depression. 

You and I would do the same thing, even if the progressive's swamp gas killed everything off in the interim.

Keep your balance here... :beer


"149 Ways (Plus One) To Find Motivated Sellers..!"  -Free Report-
>>> Click: http://sub2marketdomination.com/how-to-find-motivated-sellers-2/

Offline campbellsimon

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Re: Young investor needs advice!
« Reply #8 on: November 07, 2013, 01:02:40 pm »
This is the thing, in my opinion, there is neither a good real estate market or a bad one. Falling property values are bad to the home owner but create a buyers market for investors. Rising property values are great for investors but bad for first home buyers and investors.

Regardless of the state of the market, there is money to be made in real estate. A prudent investor simply needs to decide where in the market he or she wants to play their game and what is the most profitable place to put their money in this market. When the market changes, so will the investor's decisions.
Simon Campbell - Business Analyst

Offline surprise

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Re: Young investor needs advice!
« Reply #9 on: December 17, 2013, 07:19:05 am »
I’d recommend you to hold current unit and rent it. Remember that in some years the price for this property will increase because of simple inflation and you’ll get more money. During this time you will be renting it that will put money into your pocket. For people renting is usually cheaper than owning and bills are more predictable too, which is great news for those who prefer stable finances. If you rent your old house out rather than sell it, you could end up over time with a valuable asset that generates a regular income. If it is a good rental property, and you are confident that property prices are going to rise and you have enough money that you do not have to sell your old one to fund buying the new home then it’ll be better to rent it. Look through online websites like Localmartuk.com where people rent their property to find similar and know the rental price for your condo, then calculate your month income to make sure it’ll satisfy you. And then decide what will be the perfect variant for you.

Offline Veethim

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Re: Young investor needs advice!
« Reply #10 on: January 02, 2014, 02:29:38 am »
•   Learn Self Control
•   Current situation
•   Location
•   Considering your requirements
•   Find a proficient real estate agent

 




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