IS CASHFLOW OR CASH MORE IMPORTANT??

Leading up to the purchase of my house I had several plans for the future. 

Basic Details 

  • December of 2013, (37 months ago)
  • $78,000 (now owe 74,800)
  • @ 4.125%
  • 1,083 sq ft
  • 3 bed, 2 bath

The #1 Plan
House was to be lived in for one year while improving the interior and landscaping – expecting to use ten to fifteen grand to complete the rehab. Most of the money would be spent on materials – aiming to do much of the installation myself. 

Keep working at the current job for a couple years at the same (or better) income, while also renting my investment property to strangers.

The total cost of rebuilding would come out of my pocket over six months time. I had around 1,500 worth of disposable income each month with 3 day weekends! Time, budget, and *physical performance were all peaking about that time.

The investment would have been wonderful like that. I could have already earned an easy 300/mo of income for two years (300 x 24 = 7,200). This would be reinvested into dividend stocks. 

The plan continued as: save up around 21,000 (30% down payment for a 70k mortgage). Find a nice deal again and repeat, but without living there again. This 20k would have taken around a year and a half at most. Then rinse & repeat – speeding the down payment savings time with each additional house. 

Plan #2
Once the house is remodeled after around one year, I planned to rent room(s). Offering rooms as weekly or monthly – aiming for contractors like myself. There are two smaller rooms and a master (private bath) that I would rent for 400-600 per month. This is well known as house-hacking these days. This would/could have paid for all of my housing costs. 

That situation could have gone on for two and a half years; when my contract was to expire. If I were to have one roommate for 500/mo (2.5 x 12 x 500 = 15k).  As the contract neared the end, I could sell it (or rent it) to a family while looking for the next job prospect. 

Plan #3
Same remodeling over one year and renting rooms – but aiming for a 2nd house quicker. By end of year two, having already had the 6k from rent throughout the year & 1k/mo savings, my cash pile would be at ~ $18.

Appreciation over two years should have been around ten grand. And there’s the ten thousand in upgrades during the first year. That is 20k if I sell. 

With a grand total of 38k, I could: 

  • put down 42.2% of 90k on a new house (with no repairs required) to immediately rent out for around 800/mo. Payments would be around 450, pulling 350 profit per month. 
  • put down 30% of 126k on a two-unit house. Payment of around 700, but each unit would rent for 700 each. 700/mo cashflow (8,400/yr). 
  • put down 31.5% of 60k for 2 houses in a lesser neighborhood where rents may reach as low as 500/mo, but 650 is common, and 850 is possible. Two loans at 41k each have payments of $355, totaling 710/mo. Profit could range 300 – 950 (3,600 – 11,400 per year). Likely ~ 7k/yr. 

Plan #4

Same as #3 – up to the bullets. I would cash out with 38k. Drop out of real estate until I feel settled into an area. Live as a nomad contractor and toss 30k straight into a range of dividend stocks. And begin to toss in all my extra savings into that. 

Plan 5  — errr REALITY

Plan failed. Laid off from the position, six months after purchase. Tossing me directly down a different path. Without a replacement job for an extended time and other twists of fate, my plans were slowed. 

But now, it appears that my house value may be as high as 110-120k (assuming it is fixed). If sold, that’s around 20-30k for my pocket. That could go a long ways to fix my cashflow. 

I have only need for a few thousand for appliance replacement and miscellaneous items. 

……….

So, I had written all that after a rough few days and had a mind to sell the house. This was February 2nd, I believe. I’ve changed my mind, for now, on selling. But I still entertain the possibility. The main point for now is to get the house in livable condition and then see which path feels appropriate. And pursue it. 

……….

* I had just been through a crazy year in which I had recently lost a massive chunk of weight and had been biking many miles each week. 

2_22_2017 Wednesday, 9:20pm

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s