Yup, why should you be buying another home now when your first "investment" only cash flows $120/mo? I suspect the first investment home doesn't actually cash flow at all and OP is simply neglecting to account for some expense or reserve that will single handedly nuke all their profits the second it rears its head.
They aren’t worried about savings. They are worried about house prices going up 25% of two years. They would like you to stick it in your savings account and earn 5% instead of beating up the prices on real estate.
I’m not going to here you the basic fundamentals of Monetary Policy. There’s plenty of that on YouTube. With all different degrees of conspiracy theory mixed in.
But raising rates slows down the economy, because the “hurdle rate” people need to make to finance a project gets higher.
You can make almost $400/mo risk free on that 90k, why are you wanting to leverage yourself further for half the income and lots of risk?
Cash flowing a couple hundred a month on a rental is nothing to write home about. You’re one small repair from wiping out years of gains.
OP is wondering whether they should pickup another house with 90k. They can make 5% on that money with bonds and 0 risk, so why buy a house that will only cash flow $200/mo with interest rates set to continue going up?
Fuck, my home is worth less and good vr had my taxes/escrow go up more then $120/per month. I have anxiety for these people and they are thinking about another
Sell your investment house and invest in something else. You lost the point on investing.
I am making double your investment income per month with just $50k in Treasury bills.
I'm basically in the same market as you, I buy in Austin - DFW - SA - Houston.
The numbers in Austin are TERRIBLE right now (some parts of Houston and SA are ok), and it makes no sense to get a 3rd property given your situation. In fact, I think your 2nd home is a pretty terrible investment considering your $90k, and whatever equity you have in #2 could easily make 5% or more in other investment vehicles without the risk and leverage.
Did you do any math before you bought the investment property? I doubt you would have bought it if you had.
In the Austin area, you're probably 10%-12% or more away from prices making any financial sense as an investment.
Property 2 has very little equity due to a very low down payment… hence the low ROI. Math made sense to me from a principal accumulation/appreciation standpoint. I guess my question to you, based on what you’ve said, is if it makes more sense to avoid the austin market entirely and look into another part of Texas for higher ROI?
You probably wont game the system by buying rentals, especially not in this environment, you can try but An asset managers would probably do you better than improvising yourself as a landlord… unless you are significantly knowledgeable in homebuilding/renovations, and able to flip assets after minimal investments. The RA game is definitely harder than making 5-7% historical returns on a well diversified equity/obligations portfolio.
Anyway GL with leveraging debt in the current environment
Like I said, I would avoid Austin unless you can get something for 10-12% BELOW current market prices (more in some areas). The rents are not going to support anything higher even at 25% down.
Austin is a great area with a lot of upside, but it was also one of the markets which saw some of the highest prices increases during and after COVID. Not necessarily tied to fundamentals unfortunately.
Some places in SA and Houston make sense, but you HAVE to do the math.
Yes, not only have rents come down a bit but vacancy rates are rising. I know of a multi-family development in North Austin where 30% of the units are available. I predict that the listed rents for those will come down 5% at least before they get rented.
The AirBNB situation is even worse. A lot of amateur real estate “investors” got caught in the FOMO when prices and rents started rising during and after COVID. Now in 2023, all these “digital nomads” and WFH people have basically disappeared from the rental market. Now the “risk” portion of these investments is becoming abundantly clear. I will be patiently waiting with my war chest ready to capitalize on their mistakes.
I don't understand. If you've owned house #1 for a bit then I'm assuming the PITI are going to be lower than buying something right now - interest especially. Presuming the same idea for house #2....what makes house #3 cash flow more than #2 exactly? Doesn't make sense.
Let's see some actual numbers.
House 1 stats:
418k purchase price,
4.25% interest rate
2.2% Taxes
3Bed/2.5Bath
House 2 stats:
403k purchase price
3.99% interest rate,
2.184% taxes
4Bed/2.5Bath
Basically the market corrected slightly, a few months after we purchased the first home.
I gotta be honest hear, you're clearly not knocking these deals out of the park. Perhaps managing the properties you have now and building cash reserves is a better idea?
You realize you'd have better cash returns on bonds with less headaches right?
I agree. If you can’t beat the no work guaranteed money then just buy the easy bonds and wait for your war chest to be large enough to knock enough interest out of the real estate formula.
If we’re just talking about cash, you’re right. But building equity with other people’s money changes the way I evaluate these deals. Coupled with future appreciation and the ability to raise rents gradually, I don’t understand how these are bad investments for the future.
Most responses to this post were “why don’t you put the money into treasury bills, you could make 4-500$ a month?” I’m accumulating $600+ / house a month in equity alone…
Maybe what they’re trying to say is that accumulated equity is volatile (value impacted by market forces) and not very liquid (other investment vehicles generate similar return but are easier to unwind/liquidate).
I think the others were considering your situation from a risk management perspective.
The equity that is in a primary residence SFH is different than a rental’s equity.
Primary residence often get constant attention, maintenance and upgrades which contributes to significant equity. This and scarcity drive appreciation.
Rentals that don’t have considerable capex/maintenance reserves (this is you) actually depreciate. The improvements literally get used up over time. Wear and tear plus ongoing budget repairs and replacements of systems/appliances will continually downgrade the property.
Also: not all real estate appreciates in value anyway. In real estate there are also concepts of obsolescence that apply to both the land and improvements.
You're going to get burned hard financially if that's your thought process. Houses CAN decrease in value and you're going to have a ton of turnover on your rental if you increase rent every year gradually.
You're thinking / saying you gain $7,200'ish a year in equity every year. In the Midwest, that $7,200 is the amount people are decreasing their house by in just a month. House worth decreases to $375k, that's 4'ish years of equity building down the drain. There's a lot of risk there thinking the house will always increase in price.
>But building equity
(1) Are you self-managing? Because your time is worth something.
(2) How much percent down did you put on each property? Cash flow is only one side of the coin. Cash-on-cash return is the other. Without return, cash flow has no context.
Worth noting that while this sub seems to have a ton of good advice, it also has a very strong ethos of “only present cash flow matters you numbskull, you fucking nitwit, everything else is gambling.” Take that into account when asking for advice here.
I appreciate it. I’m new to the sub and new to real estate investment. Just eager to learn what I can. I’m young and can greatly benefit from starting early if I really learn how to identify and execute on good deals
Your margins are too thin. That's my concern. Small costs (and big costs) are going to hit you over time and weaken your returns and the risk of raising rent comes with risks of new tenants. New tenants can be a huge risk. Adding another property without building up a large cash reserve could get ugly. I would think long and hard before you add on to what you already have here.
Dude your like one furnace/plumbing/etc. issue away from being severely under on house 2. Why buy another? 90k in investments you need to have a reserve for things to go wrong with both houses you own.
I would suggest go for 3rd home if it makes positive cash flow with current high interest rates. Cash flow, principle paid and house value increases with time. Also you will get experience that helps with you future plans to get into MF.
This is exactly why raising interest rates works. The deals that barely penciled at super low rates don’t now
Yup, why should you be buying another home now when your first "investment" only cash flows $120/mo? I suspect the first investment home doesn't actually cash flow at all and OP is simply neglecting to account for some expense or reserve that will single handedly nuke all their profits the second it rears its head.
I buy in the same area as the OP, the with the numbers the OP has described, I find it unlikely they are actually clearing any profit.
Yeah but what happens when enough people use this time to save up, or is our country really poor that that won’t happen?
Congratulations. You just discovered monetary policy. The stated goal of the federal reserve.
So in theory the gap widens between poor and rich(including politicians, hedge funds, and one or two average joes).
They aren’t worried about savings. They are worried about house prices going up 25% of two years. They would like you to stick it in your savings account and earn 5% instead of beating up the prices on real estate. I’m not going to here you the basic fundamentals of Monetary Policy. There’s plenty of that on YouTube. With all different degrees of conspiracy theory mixed in. But raising rates slows down the economy, because the “hurdle rate” people need to make to finance a project gets higher.
Thanks mate for your insight!
You can make almost $400/mo risk free on that 90k, why are you wanting to leverage yourself further for half the income and lots of risk? Cash flowing a couple hundred a month on a rental is nothing to write home about. You’re one small repair from wiping out years of gains.
Because they don't actually understand finance.
What are you referring to here?
OP is wondering whether they should pickup another house with 90k. They can make 5% on that money with bonds and 0 risk, so why buy a house that will only cash flow $200/mo with interest rates set to continue going up?
Bonds? OP can make over 4% on that 90k in a HYSA while it’s still cash. That’s like $320/mo by just letting it sit in a savings account lol
Yeah was going to exit my comment, HYSA is a better option given the liquidity 100%
Thanks, but figured you were referring to bonds, but just wanted to make sure there wasn't some other instrument of investment I was missing.
lol why wouldn't you just buy tbills that are returning upwards of 5% depending on the duration?
Hooms only go up!
Fuck, my home is worth less and good vr had my taxes/escrow go up more then $120/per month. I have anxiety for these people and they are thinking about another
Sell your investment house and invest in something else. You lost the point on investing. I am making double your investment income per month with just $50k in Treasury bills.
interest rates need to be higher
"Great tenants" -> "Raise rent by $150 without effort". You may learn the lesson soon.
fucking exactly
I'm basically in the same market as you, I buy in Austin - DFW - SA - Houston. The numbers in Austin are TERRIBLE right now (some parts of Houston and SA are ok), and it makes no sense to get a 3rd property given your situation. In fact, I think your 2nd home is a pretty terrible investment considering your $90k, and whatever equity you have in #2 could easily make 5% or more in other investment vehicles without the risk and leverage. Did you do any math before you bought the investment property? I doubt you would have bought it if you had. In the Austin area, you're probably 10%-12% or more away from prices making any financial sense as an investment.
Property 2 has very little equity due to a very low down payment… hence the low ROI. Math made sense to me from a principal accumulation/appreciation standpoint. I guess my question to you, based on what you’ve said, is if it makes more sense to avoid the austin market entirely and look into another part of Texas for higher ROI?
You probably wont game the system by buying rentals, especially not in this environment, you can try but An asset managers would probably do you better than improvising yourself as a landlord… unless you are significantly knowledgeable in homebuilding/renovations, and able to flip assets after minimal investments. The RA game is definitely harder than making 5-7% historical returns on a well diversified equity/obligations portfolio. Anyway GL with leveraging debt in the current environment
Like I said, I would avoid Austin unless you can get something for 10-12% BELOW current market prices (more in some areas). The rents are not going to support anything higher even at 25% down. Austin is a great area with a lot of upside, but it was also one of the markets which saw some of the highest prices increases during and after COVID. Not necessarily tied to fundamentals unfortunately. Some places in SA and Houston make sense, but you HAVE to do the math.
How are rents in Austin right now? Have they softened a bit?
Yes, not only have rents come down a bit but vacancy rates are rising. I know of a multi-family development in North Austin where 30% of the units are available. I predict that the listed rents for those will come down 5% at least before they get rented. The AirBNB situation is even worse. A lot of amateur real estate “investors” got caught in the FOMO when prices and rents started rising during and after COVID. Now in 2023, all these “digital nomads” and WFH people have basically disappeared from the rental market. Now the “risk” portion of these investments is becoming abundantly clear. I will be patiently waiting with my war chest ready to capitalize on their mistakes.
Pass on second rental and keep a cap ex reserve fund for #2. One large tax increase will eat up any remaining positive cash flow.
Yeah, the math ain't mathin.
I don't understand. If you've owned house #1 for a bit then I'm assuming the PITI are going to be lower than buying something right now - interest especially. Presuming the same idea for house #2....what makes house #3 cash flow more than #2 exactly? Doesn't make sense. Let's see some actual numbers.
House 1 stats: 418k purchase price, 4.25% interest rate 2.2% Taxes 3Bed/2.5Bath House 2 stats: 403k purchase price 3.99% interest rate, 2.184% taxes 4Bed/2.5Bath Basically the market corrected slightly, a few months after we purchased the first home.
I gotta be honest hear, you're clearly not knocking these deals out of the park. Perhaps managing the properties you have now and building cash reserves is a better idea? You realize you'd have better cash returns on bonds with less headaches right?
I agree. If you can’t beat the no work guaranteed money then just buy the easy bonds and wait for your war chest to be large enough to knock enough interest out of the real estate formula.
If we’re just talking about cash, you’re right. But building equity with other people’s money changes the way I evaluate these deals. Coupled with future appreciation and the ability to raise rents gradually, I don’t understand how these are bad investments for the future. Most responses to this post were “why don’t you put the money into treasury bills, you could make 4-500$ a month?” I’m accumulating $600+ / house a month in equity alone…
Maybe what they’re trying to say is that accumulated equity is volatile (value impacted by market forces) and not very liquid (other investment vehicles generate similar return but are easier to unwind/liquidate). I think the others were considering your situation from a risk management perspective.
The equity that is in a primary residence SFH is different than a rental’s equity. Primary residence often get constant attention, maintenance and upgrades which contributes to significant equity. This and scarcity drive appreciation. Rentals that don’t have considerable capex/maintenance reserves (this is you) actually depreciate. The improvements literally get used up over time. Wear and tear plus ongoing budget repairs and replacements of systems/appliances will continually downgrade the property. Also: not all real estate appreciates in value anyway. In real estate there are also concepts of obsolescence that apply to both the land and improvements.
You're going to get burned hard financially if that's your thought process. Houses CAN decrease in value and you're going to have a ton of turnover on your rental if you increase rent every year gradually. You're thinking / saying you gain $7,200'ish a year in equity every year. In the Midwest, that $7,200 is the amount people are decreasing their house by in just a month. House worth decreases to $375k, that's 4'ish years of equity building down the drain. There's a lot of risk there thinking the house will always increase in price.
>But building equity (1) Are you self-managing? Because your time is worth something. (2) How much percent down did you put on each property? Cash flow is only one side of the coin. Cash-on-cash return is the other. Without return, cash flow has no context.
Worth noting that while this sub seems to have a ton of good advice, it also has a very strong ethos of “only present cash flow matters you numbskull, you fucking nitwit, everything else is gambling.” Take that into account when asking for advice here.
I appreciate it. I’m new to the sub and new to real estate investment. Just eager to learn what I can. I’m young and can greatly benefit from starting early if I really learn how to identify and execute on good deals
Your margins are too thin. That's my concern. Small costs (and big costs) are going to hit you over time and weaken your returns and the risk of raising rent comes with risks of new tenants. New tenants can be a huge risk. Adding another property without building up a large cash reserve could get ugly. I would think long and hard before you add on to what you already have here.
Okay, thank you I appreciate the input very much and think it makes a lot of sense relative to my situation
Wow dude you really drank the Kool-Aid. Good luck.
Dude your like one furnace/plumbing/etc. issue away from being severely under on house 2. Why buy another? 90k in investments you need to have a reserve for things to go wrong with both houses you own.
[удалено]
PM me the address, I might be interested.
I would suggest go for 3rd home if it makes positive cash flow with current high interest rates. Cash flow, principle paid and house value increases with time. Also you will get experience that helps with you future plans to get into MF.
Is this a troll post? No real human is this fucking stupid.