Unit 1
4 bed, 2 1/2 bath, 2400 Sq. Ft.
Similar Example:
Appraised Value: $205,000
Principal Balance: $147,373.55
----------------------------------
Total Equity: $56,626.45
Monthly Liabilities:
2013 Insurance: $-73.75 (up from 69.92/mo)
Property Taxes: $-472.09
P&I: $-760.03
---------------------
Total: $-1305.87
Current Rent: $1700 (up from $1600, leased thru April 2014)
================
Net Income - $394.13/mo
+ additonal $206.60/mo going to equity
Unit 2
1 bed + study, 1 bath, 750 sq ft.
Similar Example:
Similar Example:
Appraised Value: $115,000
Principal Balance: $110,000.00
----------------------------------
Total Equity: $5,000.00
Monthly Liabilities:
Insurance: $-42.83
HOA - $-164
HOA - $-164
P&I + Taxes: $-883.64
---------------------
Total - $-1090.47
Current Rent: $900
================
Net Income - $-190.47/mo
+ additonal $140/mo going to equity
notes: this unit is almost a break-even with the payments to principal almost equal to the loss on rent. I will plan on refinancing this unit in the future.
It's really awesome what you're doing, I can see you're a busy guy. Multiple streams of income is where it's at.
ReplyDeleteI'm not going to get into real estate due to my profession, but I am curious about it. Do you have an investment partner? The house looks new, have you had to make a lot of repairs? Are you handy with repairs? Do you plan to raise the rent every year?
Really awesome stuff AB! Most people just talk, you're making it happen. I'm impressed.
Thanks for commenting CI, I appreciate your kind words. You have some good questions. Let's see...
Delete1.) I don't have an investment partner, I invest all on my own.
2.) The picture isn't the actual house but a good representation. It was built in 1999 so is fairly new I guess, I actually lived there for a while and leased it after I bought a condo which is about to be leased now. I had an AC unit go out last year that cost me about $2500 to replace. I did get to write that off of my taxes so it wasn't a total loss but my profits took a big hit. I'm contemplating getting a home warranty policy but right now I'm taking my chances.
3.) I'm getting a little more handy with repairs lol but I leave the big jobs to an expert. Mostly it's small things: lightbulbs, door stops, air filters, touching up the paint, etc.
4.) I hope to raise rent every year or at least every two years, it depends on the market. I'm still fairly new at this.
My main goal is to have someone else pay the mortgage + expenses and make a small profit while the house appreciates in value. The mortgage market isn't great but it has to rebound at some point. I'm also in Texas and we weren't hit hard here at all.
My condo is on the market and getting a lease wrapped up now. It's not going to be profitable currently but I have other plans that I will post soon.
Hey Austinbroker, I would try to get unit 2 re-financed asap. Do you think you will have luck with it? I got denied by quicken loans and wells fargo because they said my balance was too low... =( This has been my main reason for being forced to basically pay my debts off fast.
ReplyDeleteMy student debt loan is below the threshold to get any tax benefits from the interest paid so my real-estate portfolio will be snowballed next year once this student loan is paid off.
Thanks for stopping by. I'm actually going to pay off the second lien on my primary residence before I do that. I'm also very familiar with the loan approval process as I've been through it so much. If your balance was too low you probably didn't meet the reserve requirement. Most banks want to see now 6 months of reserves that would cover your liabilities.
DeleteI seriously had to shop eight different banks to get the approval and rate I needed on my new primary residence. I was denied at all but two of them for various reasons including debt/income ratio. That seems to be the biggest issue for me. The income from a new rental isn't counted as income when applying for a loan. They average the income shown on the last two years of tax returns. It gets complicated with me having a w2 , k1 and 1099 income. You get credit for your current monthly w2 income but the rest is averaged over two years. I also write off a lot so that doesn't help my income numbers. I ended up doing an 80/10/10 and plan on paying off that second lien by next year since it's at a much higher rate.
As for the condo, my wife actually bought it when she was eligible for the first time homebuyer credit. I think it was $7k cash back. The problem now is that it's considered an investment property and rates aren't as good as a primary lien. It's at 5% now on a 30-year fixed which isn't bad but I'd still like to put some money down and get a little lower rate. With the write-offs from interest and taxes I am not really losing money on it. The other thing is that I didn't charge enough rent. It was seriously on the market for only 1 day. I plan to raise the rent next year.
Once my second lien is paid I plan on building up my DG portfolio considerably and then I'll consider refinancing this one.
Oh I meant the balance on the mortgage was too low. I tried to re-fi for 24,000 and I was told by one bank that anything under 50k is dismissed, and the other said I could re-fi for 80k and just make a huge payment on the first one that comes around, I declined that because it didn't make sense to pay closing costs on an 80k loan in the long term.
DeleteMy tax returns are always complicated as well, which is a good reason for me to avoid using credit in the future. I will try to pay cash for everything I can. And see how it plays out.
Investing Early,
DeleteI've never heard of not getting approved because the balance was too low. I think I'd shop that to some other banks. Every bank has their own policies and different underwriting guidelines.
I agree it's usually better to pay cash for anything you buy. The only things I have financed are real estate and one vehicle. However, If I had an additional 150k in cash given to me, I don't think I'd pay off my rental. With the low interest rates and tax writeoffs I think that 150k might be better invested in DG stocks that are earning a yield close to 4% that would continually grow each year. I would really have to run the numbers and think about it.