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updates, opened an HSA and new strategy w rentals

September 21st, 2015 at 06:44 am

Hi all

I opened an HSA with Health Savings Administrators or healthsavings.com. Flat rate of $45 a year. There was one other one that might have been less cost dependent on how you invest, how much you had in there etc. this was $45 flat and had good Vanguard funds so felt like the easier choice.

Plan is to use this sortof like a 401k and NOT withdraw from it (unless some dire medical emergency) until retirement. This is one I set up individually not through where I work so money put is in AFTER tax but should; be tax deductible. Limit is $3350 this year. Will try to fund this , the 401k and the Roth every year. Trying! I put $50 in it to start the account.

Trying to be financially free in 5 years is exhausting stressful work!.. less than 3 years left.

that rental house is filled. the other house is almost filled. still confirming things (manager is slow)..

New strategy w rentals. I am going to get some outside opinions , use the web and get selling price estimates across the 6 homes so I have a good market value and look to 'swap' some out that and increase the quality of the neighborhood and therefor maybe lower my costs, not be so stressed with management etc etc.. . Step 1.. get market values this week ( I will get the 3 units value even though I can not sell that right now and really do not want too. rents easily, good area, great cash flow but realistically long term mayeb I would want small homes vs apts.. we will see... be interesting to see what folks think it will bring). 2. decide which to sell.. 3. I was going to take a stab at selling at least one via investor contacts and Craigs list (yes, really) have had friends sell them like that. why not me? 3. get a pulse of the market and homes and prices to see what I can buy w the cash 4. run my thoughts by some advisors for thoughts about selling at all, sell now or later. 5. get the new managers thoughts on ease of renting these homes. really we have only had issues with one home..

I may lose some cash flow upfront if I do this.. but steady returns and simpler may be preferred and cash flow will come as it is easier to raise rents on a more highly desirable area.

I can not be 'financially free' when I am stressed w the rentals anyway..

I did go for lower quality areas to 'get in' and do not regret it .. easier to get in.. much more cash flow...now I have somethign to swap... but is that where I want to stay??.. I am not thinking so. I have options now to 'swap' out of them and I think I may take that opportunity.

Anyway. just thoughts right now. got to get some facts, do some research and think on it. no more fast decisions over here!

Onward.

6 Responses to “updates, opened an HSA and new strategy w rentals”

  1. Another Reader Says:

    To be successful long term in real estate investing, you cannot swap properties or make other radical changes in course constantly, as you seem to do. The costs of making these changes is high because of transaction costs.

    You bought "C" grade properties that needed a lot of work from a landlord that wanted to exit the business. These properties have appreciated, but the "A" grade properties have likely appreciated more. That makes it more difficult to maintain cash flow in an exchange.

    You are getting out of the Section 8 hassles and into market based tenants in your holdings. Quality tenant selection and continued improvements will reduce the problems you are having currently.

    I would look to add to my portfolio when the numbers make sense. The value-add in your current portfolio are the capital improvements and better, more stable tenants. Leverage or sell these properties once all the major repairs and upgrades are made, but only if you can get real cash flow out of an "A" or "B" property. If you accept significantly inferior cash flow, it's not a good exchange, especially for someone that expects to rely on the cash flow.

  2. Rachael777 Says:

    Agree with all you are saying .. especially not going down too much in cash flow...and appreciate the input. Also agree I have smoothed and upgraded the 6 homes considerably... ... all things considered though would prefer nicer area homes. not A areas but B or high B. I have 3 what I consider B homes right now and 3 C homes.. Researching selling prices, and new prices now. Would not want to incur any debt doing this by the way..so will just see what the #s say and try to get some input..

  3. Livingalmostlarge Says:

    Can I ask how you determine A, B, or C level homes? Why is it a bad idea to buy properties that are C and not keep them? Can you turn them into A level properties?

    How much of a differential was there when you bought between the different level of properties?

  4. Rachael777 Says:

    I thank you for the question because it made me realize I am referring to 2 different things and maybe AR is as well. I think there is a A, B and C for quality of house (physical structure) and A, B, C for quality of neighborhood. I did fix these homes up and yes you can go up the 'rankings' of 'quality of house' if you fix them up, repair, rehab. I am looking at swapping due to neighborhood not physical structure though. If I were to define A, B and C. I would say for QUALITY OF HOUSE. A= is no repairs/updating needed, B= cosmetic/update issues C= is major repair needed. for NEIGHBORHOOD I would define A, B and C as A=90% or all owner occupied, premium paid for location, , high middle class to upper class, low crime, premier schools, all homes well maintained, highly sought after, unless you get some crazy deal it is hard to make renting a house in a neighborhood like this cash flow at all B= middle class, working class area, good schools, smaller homes, mix owner occupied and renters, homes in good shape but maybe not all 'up to date' , well maintained by occupants (not vvendors), minimal crime C= crime, almost all people are renters, some homes in disrepair, bad neighborhood reputation. My homes were a mix of low to mid B to high C for both shape and neighborhood. Homes are in shape now but am now looking to go up on to high B and eliminate all C neighborhoods. There are of course levels of A, B and C. Rents do not vary as much as homes prices across neighborhoods so you make more in B and C neighborhoods. B/C renters do not care as much if the house is cosmetically not up to date. My fixups were done w cosmetics to mid grade B standards. Does that help? WIth no $ and no ability to get a bank loan, I chose to get into a lower grade home just to get in the 'game' now I am thinking of selling these. Be interesting to see how the #s come out. Of course I will share here. I have already scouted some homes out in better neighborhoods and talked to some folks on pricing for mine.

  5. Livingalmostlarge Says:

    So are you changing out multi units for single families? Or SFH for multi units? Do multi units make more? How long term were you hoping to hold these units? Was it always the plan to change it out to something needing less work and in a better area?

  6. Rachael777 Says:

    HI there. I can not sell my 3 units right now (contract sale) but I was thinking of selling the 3 homes in that 1 C area.. I had some initial comps run and they were good. also looked at some homes in A and B areas.. (obviously more but prices are still depressed and distressed sales out there) so yes may be doing a switch..investigating. My plan w the 6 homes was to 'get in' and keep them forever OR swap them out. Did not know them. Now I have learned some things about Me, the homes and management and I want homes I can potentially manage myself in better areas to keep essentially forever. I WILL lose cash flow w this .. at least up front but may make up for it quickly w ease of raising rents, less costs, less time vacant etc.. no city inspections.. and YES.. multi units in general make more and I a looking at 2 units in high B areas as an option too. Also talked to the NEW property manager (he will take over in Nov) and he has a client who is looking to get out of teh business and move (very common as people retire). she has a bunch of fixed up B homes/2 units she may want to sell. We will see. LOTS going on w this insane existing property manager. none of it good.

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