Real Estate Investor since 2018. 24 units and counting.
Annapolis, MD
Joined November 2016
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A lower rate usually costs points. Even MBA's 7.21% average includes them.
Example: 2 points on a $350k loan is $7,000 to drop 7.21% to 6.71%. Saves about $117 a month. Break even: about 60 months.
Refi or sell before year 5 and the points lost money.
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Unpopular opinion: a 1031 can cost more than the tax.
Example: $200k gain, $60k of it depreciation. Federal tax at 25% recapture and 15% on the rest: about $36k, before state tax.
Then the 45 day clock starts. Overpay 10% on a $500k building and you gave up $50k to defer $36k.
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22
Inflation ran hot for a third straight month. Rent did not.
October CPI: prices up 0.4%, after 0.6% in September. Rent index: up 0.2%.
Mortgage rates jumped from 7.18% to 7.30% the same day. On a $300k loan, about $24 more a month.
Underwrite slow rent growth and today's rate.
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Eligible veterans can buy a fourplex with $0 down.
VA loans cover up to 4 units if you live in one. Down payment on a $500k fourplex:
VA: $0 (2.15% funding fee can be financed)
FHA: $17,500
Investor loan: $125,000
For the right buyer, it's a very strong house hack.
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A cash out refi on a 3% loan can make your new $100k cost about 16.6% a year.
Example: $250k owed at 3%. Refi to $350k at 6.88% and yearly interest goes from $7,500 to $24,080.
Keep the 3% and add a $100k HELOC at 7.49% (variable): about $14,990.
Reprice only the cash needed.
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The costliest rental mistake of 2022 wasn't the rate. It was counting on appreciation.
Example: $350k, 20% down, $280k at 6.93% is about $1,850 a month P&I. Add taxes, insurance, repairs, vacancy.
If rent doesn't clear all of it today, pass. Appreciation is a bonus, not a plan.
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57% of renters with leases ending in Q3 renewed. In 2006 it was 46%.
RealPage says rates would need to fall to about 5.5% for a median home payment to match rent. Rates are still near 7%.
Renters are staying. I price renewals to keep good tenants, not to squeeze the last $50.
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242 U.S. cities now have a typical starter home worth $1M or more. Before the pandemic it was 80.
Maryland has 4, up from 1 in 2020.
The national typical starter home is $198,649.
Two different markets. In the pricey ones, a 2 to 4 unit house hack is one way in.
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Second home loan or investment loan? It matters.
Fannie Mae max LTV, 1 unit purchase:
Second home 90%
Investment 85%
Example on $350,000: $35,000 down vs $52,500.
A second home can't be mainly a rental, no manager can control bookings, and the rent can't help you qualify.
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Baltimore City signed a rental licensing overhaul. Two dates to know.
Now: the city can ask a judge to appoint a receiver for the worst violators.
Dec 31, 2027: no license or renewal with an unpaid water bill, and inspectors must be licensed.
Add both to your due diligence.
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Anne Arundel in October, per Realtor.com:
Median list price $524,945, down 4% from a year ago
Active listings up 12%
Median rent $2,700, flat
Better for buyers. Riskier for BRRRR. If you plan to refi, set your ARV off recent sold comps, never last year's list prices.
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Multifamily CMBS delinquency hit 8.09% in October, per Trepp.
A year ago: 7.12%. Two years ago: 3.24%.
Debt written cheap now resets higher. Example: a $2M interest only loan at 3.5% costs $70,000 a year. At 6.5%, $130,000.
That gap is where motivated sellers come from.
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The average HELOC is 7.49%, up 13 basis points this week.
Example: $50,000 is about $312 a month interest only. At 8.49% that is about $354. At 9.49% about $395.
It can fund a down payment without touching a low first mortgage. The rate can move, and your home is on the line.
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If a short term rental needs $4,000 a month to break even and you only have 8 strong months, those 8 months have to cover the full year.
That is $6,000 a month in season, not $4,000.
Run the off season at zero before you call it a winner. Income and local rules can change.
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The 10 year yield closed Friday at 4.86%. The daily 30 year mortgage index held at 7.17%.
That spread is 2.31 points.
Your payment follows the mortgage quote, not the Treasury print. I price a 2 to 4 unit at the rate I can actually get today.
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23
October added 165,000 jobs. It also added 339,000 people in part time work who want full time hours.
Wages rose 3.1% over the year. Example: $1,800 rent grown 3.1% is about $56 more a month. A 5% hike is $90.
With 24 units, I do not bake in rent growth faster than paychecks.
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Points vs rate on a hold: do the months math.
Example: 2 points on $300k is $6,000. If that cuts 7.18% to about 6.68%, P&I drops from about $2,032 to about $1,932, roughly $100/mo.
Breakeven about 60 months. Long hold rental: can pencil. Short flip: usually not.
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Costliest flip mistake: underpricing the bridge.
Velocity new loans averaged 10.12% in Q3. Hard money often 9% to 12% plus points.
Example: $200k at 10.5% IO is $1,750/mo + 2 points ($4k). Bake that into ARV before you bid.
What's your max all in hard money cost before a pass?
Redfin (4 weeks ending Nov 1): 4.6 months of supply. That is a balanced market band.
Pending sales down 16.4% year over year.
21.2% of listings cut price.
Sale to list about 98.3%.
For flips and rentals: stop chasing over ask. Price the offer to today's absorption, not 2021.
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Brian Graham retweeted
BREAKING: Indian government sources say Starlink is welcome in India. 🇮🇳
“Customer is the king,” one official told ANI today. India welcomes competition in satellite internet, and customers will choose their provider based on price, value and quality.
Yesterday brought good news for Starlink Direct to Cell too. TRAI proposed letting Indian mobile operators use their existing spectrum to connect phones directly to satellites. If adopted, the proposal could give Starlink a path to bring Direct to Cell to India through a local telecom partner, helping people stay connected where cell towers don’t reach.