In my last update I mentioned getting an additional $100/mo for a total of $1000/mo rent on this condo unit. The unit is above the break-even point with payments of principal higher than the negative cash flow but the negative cash flow still bothers me.

I had been tossing around the idea of a third property.  However, I realized that I can now pay off PMI from the FHA loan on my condo unit.

According to FHA, you have to have 78% LTV in order to get rid of PMI.  You also have to have 60 months worth of payments.  Even if you had 78% LTV then you would still have to wait.  Also the value only goes off of the original appraised amount.  So even if your property has increased in value then you still have to use the original valuation for the 78% LTV purposes.

The condo had an original appraisal of $119,500.  So 78% of this amount is $93,210.  About a month ago I decided to start paying down this debt.  The loan balance at that time was $106,074.09, so I needed to pay down an additional $12,864.09 to eliminate the PMI which is currently $49.56.  This is a ROI of 4.6%. This isn’t too bad and since I still have negative cash flow I decided I would pay this loan down immediately. Not to mention, that after paying this loan balance down, I will have more of the monthly payments going towards principal.

So I am on track to have this balance paid down sometime in September.  After PMI is eliminated, I will again start looking at an additional property or possibly paying off this entire loan since it’s the highest interest rate of any I have at 5%.  I’ve also go another investment idea that I will be posting very soon.

I previously had posted an update on June 20th about this unit that can be found here.  I listed the Condo for $1000 as planned and it stayed on the market for about 1 week.  I actually had an offer on it after two days but the first potential tennants didn’t pass the background check.  The second offer came about 5 days later.

I’m happy to announce I have two new tennants that signed a one year lease for $1000/mo.  This is an increase of $100/month from my previous rent of $900/month.  I’m also above the break-even point now with the portion of payments going to equity.

I am currently looking at another potential rental since I believe interest rates will keep rising.  I had originally thought about paying off the condo unit first but I am contemplating adding a rental unit #3.

I will keep posting updates as they happen.   

I don’t have a lot of updates with real estate, usually just a few per year since the leases usually run 12 months. I’m still learning quite a lot and have a lot more to learn. I wanted to give an update on Unit 2, the condo unit.

My tenants had to move out early due to the wife getting a job in another city but the original lease runs until the end of July. Last weekend I did a walk-through before I put the unit back on the market. The good news is that the previous teants left the place in great shape, I don’t even need to hire someone to clean. It is a good idea to check if anything needs replacing or repairing, such as the fan coil unit just to make sure everything is up to date and ready to go. I also have checks to cover through the end of July should the unit not lease sooner. If I get the unit leased before the end of July then the tenants would get a pro-rated portion of their rent back. Either way, I have over a month to get the unit rented without risking one day of vacancy. This is great. I’ve also listed the unit with a rent increase to $1000/month from $900/month currently. I’ve already looked into a tenant credit check for a couple of applicants.

The market in Austin in booming and it’s hard to find a one bedroom at a decent price near downtown. Although the HOA dues are high , $164/month, the unit gets a lot more traffic than the house I have just outside of town. I already had someone look at the unit yesterday. Last year the Condo was barely on the market 1 day before being rented. This is another reason to raise the rent. If you can afford to live in a condo, then good on you. There are just the fair few who like to abuse the system. No matter where you are in the world, there are companies similar to Piermont Grand who offer amazing condos. You just need to do your research if you are looking for a new place to live, and of course be financially stable too, as this does make a lot of difference.

The bad news is that even if I get $1000/month I still won’t have positive cash flow yet. I will be really close though. However, with the payments to principal I am still increasing my net worth each month. One of my goals next year will be to pay this unit off. I’m currently coming up with a plan to pay the rental off using an amortization spreadsheet. I’m sure I’ll be making a post once I get my plan together. Once paid off I’ll have over $500/month income after taxes, insurance and HOA dues – if you want to find out how to collect delinquent hoa dues, you can visit sites like the Equity Experts to find out more. I still hope to have half my income come from rental properties and half come from dividend growth stocks.

The lease on my house rental was expiring next month.  Rental rates in my area have been going up rapidly.  My condo rented in 1 day on the market last year.  I plan to increase the rent on that unit next.  Austin was rated by Forbes as America’s fastest growing city.  See the article here if interested.   

 

 I was currently renting a 4/2.5 for $1600.  I gave the tennants the option of renewing for 1 year at $1750 or 2 years at $1700.  They offered 1 year at $1675 but I settled for a 1 year renewal at $1700.  So I was able to get an additional $100/month or $1200/year rent.  This will certainly boost my income. 

I don’t expect a lot of real estate updates this year.  I will be renewing the condo lease soon but my goal of refinancing my primary residence to around 3% may not happen.  If you have noticed, interest rates are already on the climb.  Bankrate has the 30-year fixed average at 3.74%.  This is up from around 3.25% earlier in the year. 

I plan to continue aggressively building my DG portfolio until it equals the value I have invested in real estate.  Then I may start to pay off the condo rental or look for another rental property.