Tag: t_top9homeUS

action plan about buying property ] u.s.

[18] 250k 1st buy: choices

Posted on by tiger40490

Consider H.Yi’s strategy (9710 62nd Drive, Rego Park, NY 11374), and 43 Rockledge hotel model

I sacrifice [home size; SD; CC2; full appreciation with land] and bet on connectivity, which hopefully provides [RD; partial appreciation; liquidity ]

Suppose I have 150k spare cash and a budget of $200k-350k for my 1st rental property, I could choose

— Option 43R: small wood house with 3 to 6 rooms, in a popular rental location. Rental yield would be much higher than Option C, but more legwork.

At Bayonne, I could buy a 350k two-family-home with $600 x 7 rooms including the attic+basement for 50k/Y gross rental income. At 10% vacancy rate, it’s still 45k/Y. Tax 11k/Y is easily taken care of. Assuming 5k annual maintenance cost, my NRY = 25~30k

Foreclosed property (viewable, unlike pre-foreclosure) can be a bargain.

— Option R: At 250k, I hope to buy a SFH with 3-4 bedrooms including attic and basement. No math done yet.

— Option C (inferior): tiny family home in a popular location (like Bayonne, JSQ, Weehawken) with good CC1 and RD. Probably not great school district 🙁

  • small house

This option feels safe as long as … reasonable income or appreciation and high liquidity, so I could sell any time. In the interim, the rent would be a big bonus if net positive cash flow.

— Risks and concerns:

  • Right after buying, bank balance basically wiped out, a bit dangerous
  • risk is much lower if i can live there myself
  • risk is smaller if I can divide into small rooms but it’s harder if condo and remote-managed.
  • pTax is even worse than mtg interest (which I could pay down), so Option 43 yield can hopefully offset that.

[17]2phase: relieve rental burden #steps

Posted on by tiger40490

All my life, I have felt very uncomfortable with big rental burden (debt too .. another topic), so I always find ways to reduce it.

  • in Newport, I was paying $2000, then increased to $2200 ! (I just hated the hike) So I quickly subleased the big room for $800 and felt much better.
  • In Fort Hamilton and Bushwick, I had to sublet one room to /reach/ an affordable rental cost level.

When my family finally comes over, I will need to find quick relief. A questionable relief is buying a home as it will further aggravate the cash-flow burden, and sink me to cash flow lower ground ! My default plan:

  1. Try to save up USD 100k (discussed below) in advance. Convert SGD if needed.
  2. give family a feel for the different parts of Bayonne. Bayonne is low-rental town. Hopefully we narrow down to 2 or 3 locations.
  3. locate the best rental home. There should be many reasonable choices so won’t take too long.
  4. Get family prepared for downsizing, potentially challenging.
  5. Pick a place up to $1500-2000/M. If too many rooms and too expensive, I will consider sublease part of it.
  6. construct a div stock (Reit) portfolio.. low volatility, to be liquidated in the next step
  7. Within 2 years (hopefully 12 months) buy a first rental property 200k-350k like 43R, with NRY to help defray my rental expense
    • It could be a pure rental property but I can still use the basement for storage.
    • If acceptable, my family could use it, reducing various risks

In the long horizon (no timeframe), I could buy a 2FH for family use, and sublet one unit. However, 2FH creates heavier cash flow burden including pTax

Q: USD 300k war chest for rental relief? How would it change my life?

  • I could stay in SG forever
  • I could target JC jobs, and spend $1.5k/M net rental in Bayonne/JSq forever. Or $2k in JC/Hob.

Q: USD 100k war chest for rental relief?

  • This amount means a lot to rental home comfort [size..]. $1k/M additional rental will exhaust this amount in 8 years !
  • This amount is insignificant for branded colleges .. not worthwhile
  • This amount is insignificant for a SDXQ home .. not worthwhile
  • This amount is easy to squirrel away, esp. in SG
  • This amount as a target bonus, is brutal and unforgiving. I won’t accept such a target. I will reject such a target.
  • To relieve work stress, I can realistic consider giving up $30k/Y salary over 10Y. USD 300k lost_pretax_income is no big deal to me. (After-tax, it would become a 200 lost income.)

##1st U.S.property: don’t rush

Posted on by tiger40490

You may feel some of these items look so familiar and well-understood, but 10 years later, one of these risks turns out to be the biggest underestimated risk and a big concern if not a loss-maker. How much you have thought over or consulted friends is not a guarantee that you have really understood it.

  • risk: overconfident about rental demand
  • risk: underestimate of running cost
  • risk: risk@delinquent tenant
  • risk: overpaid, and devaluation. Ask Jack He.
  • risk: unexpected poor liquidity… hard to sell
  • risk: forced to move home due to school
  • risk: you find out later the neighborhood is dirty, has drugs …
  • risk: you find out later the daily commute is too long
  • risk: …. yet unknown

My sister once said “Our salary can only increase as we grow in our career.” Right there I saw the risk of over-optimism.

If done properly, property investment can yield substantial financial gains. So far, my property investments have appeared to be lucky. Those personal experiences have bolstered my self-confidence and faith in the property markets globally.

(Actually, the SEA investments have yet to prove themselves, and the BGC Uptown has suffered currency devaluation….)

However, as in my sister’s case, I’m over-optimistic and neglecting the risk of a drop.

It is prudent to rent in the target area for a while.

It’s imprudent to buy the propaganda about a town’s investments, momentum, special location …

It’s prudent to fully analyze our non-investment needs for a house. A property that we can use for our family life is a much safer investment than a pure investment property. For example if the school and commute profile is good, but the value drops, I’m less worried than a pure investment property.

It’s prudent to buy a small price tag. See prefer small investments,esp.property #sticky

[17]saving target towards 500k family home@Bayonne #milestones

Posted on by tiger40490

Cash-flow and savings — are the drives of this plan.

  • Phase A [completed]: rent a place myself, saving up for Phnom Penh, then saving up towards 60k balance [I saved more than 100k].
  • After family comes over, we try out different locations
  • Milestone B1: Buy a 200-350k[1] rental property with net non-negative cash flow (Don’t care how much!) to cover repairs… See 250k 1st buy#YH”hotel”
  • Phase C: saving up towards 200k, while paying $2k rent as family…. Tough. May take forever. May need to tap into four overseas rental income[TheBridge, BGC, #2-1173]. [Now I have six sources.]
    • As grandpa and Jack He suggested, we could rent long term, trying different schools until we are satisfied with commute, street cleanliness …
    • I prefer to minimize the renting phase, but beware of risks [1]
  • Milestone D2: “upgrade” my first rental property to a bigger rental property or buy a second small rental property. Goal: total net cash-flow of 2k-3k.  With this cash flow I can enjoy the flexibility of renting for ever. (7.5k NGRY@43R, but NRY is unknown)
  • Milestone D3: when and if we are confident about a location, buy a 2FH  for 400k-800k (can sell the rental property at par or at profit). Bank balance before the sell could be 50k to 150k. I don’t really care how much cash inflow from the sell, but I should have more than 30% of the price tag. At least one floor to be rented out for 1.5k-2k. 2FH is not always available in my choice locations, but Bayonne has many.
  • Phase E: when boy reaches high school age, or if necessary, rent in a better school district.

[1] Be risk averse. Limit your exposure. See u.s.home buy: don’t rush

————- That’s the savings plan, but … —————-

  • What if … the rental property depreciates? delay D2.
  • What if … no rental property could generate positive cash flow? I would save more and delay B1, or execute B1 but pay down the mortgage aggressively.

owner-occupy^lease-spread #Jack.He #lease3spread

Posted on by tiger40490

https://tanbinvest.dreamhosters.com/2017/03/08/sell-a-unit-to-finance-u-s-home-purchase/ is the opposite suggestion.

My friend Jack He gave an unconventional tip about lease spread: “Buy your 1st property as investment, and don’t need to think so much about how suitable it is as a family home. Better rent a family home.” I replied “Yes, when we live in the city for a while, and figure out what we want, we can then buy a long-term home.”  Jack pointed out that if you rent, you can move very easily. When your kids go to high school, you can simply pack up and move with them. However, look at the various risks in ##U.S.home buy:don’t rush #sticky. In the scenario of disappointing rental income, it would be much better if my family can use the home. Therefore, to play safe I can’t follow Jack’s unconventional tip.

In reality my wife is unlikely to choose that. The practical benefits of staying in our own home are overwhelming:

  • can renovate the way we want __but__ DIY is painful
  • can buy nice furniture
  • tax rebate. Assuming 25% marginal tax rate, a $1k mortgage interest (not the full installment) you pay could save $250 on tax.
  • Some pTax amounts are also deductible from your income tax? See https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/Claiming-Property-Taxes-on-Your-Tax-Return/INF29463.html
  • some sense of ownership and security __but__ my (4+) overseas properties already provides it.
  • — Jersey City realtor Zak wrote 8 reasons to give up renting. Here are some of his pointers —
  • lower cost-variability than renting over longer horizon, assuming you take a fixed-rate mortgage. no worry about rent increase, lease termination etc __but__ the stability also ties you down

Many non-Chinese families really prefer renting indefinitely, with benefits:

  • can minimize commute
  • no tie-down, as Jack He said
  • no maintenance burden
  • no DIY home improvement dilemma
  • sublease, if your property is too big
  • less worry about bad neighbors
  • no worry about damage to the property
  • no risk of unexpected poor liquidity… hard to sell
  • easy move when you find out the neighborhood is dirty, has drugs …
  • easy move when you find out the daily commute is too long
  • when your kids graduate to a higher-level school ..
  • If you don’t like the school ..
  • If mom or dad gets a new job ..

Sugg #1: As a first milestone, buy a rental property for rental income, and stay rented with family indefinitely (perhaps with a sublease tenant[3]). Jack He felt this is a good idea. To maximize rental yield, consider 43 Rockledge hotel model

Sugg #2 : buy a smaller home for the family, and stay alone rented near office half the days for a few months, just like John, Shanyou, Alok and Deepak did at RTS

[3] lease3spread .. involves 3 rental _payments_

rental prop family sub-tenant
             2FH
typical $2000 -$3000 $1000
payer – me –
receiver me – me
owner me – –