Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
I owned 10 rentals in the DFW area with the goal of appreciation, not cash flow. My goal was to build up my retirement nest egg and my thought was that, when a property paid me back in full (I banked all the rent payments)for initial outlay and all ownership expenses, I would sell at a big profit. I purchased most of the properties (SFH’s and townhouses) during 2008-2012 in a very competitive investment climate at that time, using cash. When I was making purchases, loans for investment purchases had significantly higher interest rates than conventional mortgages. I am surprised OP can obtain a rate that pretty much mirrors regular mortgage rates for investment purchases. Its difficult to “time the market” but I did make my purchases between Halloween and Valentine’s Day each time; market seemed softer when people are busy with holidays and school is in session.
The real estate market was very soft back then, but investors were like hawks circling the only fresh kill on the highway! I knew the very soft retail market at that time would rebound and my goal was to sell in five years. I managed all the rentals myself. My rental properties had repaid me by 2015, when I retired. The current market prices will not make that possible for you. Example: a forclosed house purchased in Irving for $56K would now sell in the low $300K’s…. My properties are all “starter homes.”
But, I still retain three of my initial rental houses. Mostly due to laziness, I failed to sell everything by the time I qualified for medicare. With my last sale, after age 65, my contribution for health coverage skyrocketed for two years due to my earnings. I probably won’t sell the last three properties. They pay for lots of nice vacations. My son now manages them and will inherit them.
The only slight downside to owning the last three rent houses are the continuous - just about daily - phone calls, texts and letters from investors wanting to buy my properties. I spend more time blocking phone calls and emails than I do managing the rentals!
Last edited by WorldKlas; 08-07-2023 at 09:25 AM..
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,567,170 times
Reputation: 16693
I think for most people here on cd it’s not a good time for real estate.
However if you are knowledgeable, hard working, and can think outside of the box you can still do well.
Nowadays you often need to value add to a property.
I'm really surprised the bank will even make that loan.
Quote:
Originally Posted by WorldKlas
I am surprised OP can obtain a rate that pretty much mirrors regular mortgage rates for investment purchases.!
Typical rate for investment property is regular mortgage rate plus 1%. The rate I locked in is with buy down points. Interestingly, my mortgage guy informed that it's difficult to get approved without buy down that will lead to over 8% interest rate, regardless of how my finances are in order. I'm not sure if this is true across multiple lenders.
Loan is still ongoing, hoping to close out by end of the month.
Dealing with multiple renters will not be an issue for me. Maybe I don't know what I'm getting myself into. Time will tell. I already have one rental. The rental issues I deal with is very minimal, compared to my typical demanding W2 job.
Out of curiosity, I ran the numbers on my rentals to see what my CoC ROI would be if I pay an interest rate at 7%. I purchased my rentals with the rate between 3% to 4%.
My CoC ROI would drop somewhere between 5% to 6%. Some ROI will drop below 5% which is what you can get on a CD these days. If that's the case, then just put your money into a CD. In short, I would not purchase new rentals at these interest rates today.
Adding the fact that you don't have the down payment $ needed, so you'll pay an additional 7.24% on the refinancing your rental for your down payment that you'lll need to pay back. That means if you take this borrowed money into a CD, it will have to pay above the 7.24% yield just to break even. That means on a new rental, it will have to give you a 17% - 20% ROI just to make it worthwhile. The reality is this will further reduce your actual CoC ROI number. Run the numbers carefully to see if it's worthwhile for you to take this venture.
Last edited by BigfishTim; 08-13-2023 at 02:11 PM..
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
34,711 posts, read 58,042,598 times
Reputation: 46182
Quote:
Originally Posted by fleaflicker
Typical rate for investment property is regular mortgage rate plus 1%. The rate I locked in is with buy down points. Interestingly, my mortgage guy informed that it's difficult to get approved without buy down that will lead to over 8% interest rate, regardless of how my finances are in order. I'm not sure if this is true across multiple lenders.
Sounds like your mortgage broker is leading you into their typical trap. (Their incentive is to capture you and as much of your money as possible).
I hope you did NOT have a RE agent feeding you the same line of crap.
There will be a reckoning (and you will face it).
We trust you will endure, learn, succeed, move on.
Personally, I have learned when to cut bait and leave the potential losses behind. (I watched my parents and inlaws lose everything doing RE 'deals', gone south. (including their own homes).
I hope OP has allowed for ever increasing insurance costs. Florida's homeowner's insurance crisis may be spreading to other states including Texas. Many homeowners here in Florida have seen their premiums triple and more in the last three years, many doubling in just one year.
I realize insurance, like everything, is going up everywhere but didn't know premiums were doubling and tripling year over year in other states just yet. I thought we Florida folks were leading the charge.
If that's the case, then just put your money into a CD.
I have other investments. The intention is to grow real estate without moving funds from one investment to another. Real estate vs CD vs stocks is another topic.
Quote:
Originally Posted by BigfishTim
Adding the fact that you don't have the down payment $ needed, so you'll pay an additional 7.24% on the refinancing your rental for your down payment that you'lll need to pay back.
I'm refinancing the current rental property so I can purchase 2nd property with cash. Plan is to have two rentals, one mortgaged, one fully paid.
I hope OP has allowed for ever increasing insurance costs. Florida's homeowner's insurance crisis may be spreading to other states including Texas. Many homeowners here in Florida have seen their premiums triple and more in the last three years, many doubling in just one year.
Yes insurance significantly increased this year in Texas. Also unfortunately for renters since this will lead to higher rents.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
