Advice

We Make $19k Per Month. Should We Decouple Our EC To Buy 2 Properties For Investment?

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Jay
Jay
5 months ago

You’re using the word “cost” too loosely imo. Probably in your context, you had meant the initial cash outlay with respect to each of the options. The difference is relevant to the couple in question as they are considering the second property as investment.

For decoupling, the outlay is roughly 590k, of which 350k is used to capitalize the property; the remaining 240k is expensed.

For selling the existing then buying two new properties, the outlay required is about 770k, of which 650k is capitalized; 120k is expensed. The amount needed for downpayment is higher, but they will be selling their current which will free up liquidity to offset that.

When advising others on making investment decisions it is important to make the distinction. While understandably cash requirements is high on the list of considerations for most, return on capital should be very important as well. Therefore, it is up to the investor to weight how much they value simplicity and liquidity (spending less cash up front) Vs returns (by spending less on expense and diverting that into investment capital instead). Just lumping everything as “cost”, it’s easy to lose sight and focus solely on cash outlay but ignoring that decoupling actually “cost” 120k more in actual expenses just based on your calculation.

Tks
Tks
5 months ago

Why buyer’s new loan only $630000?

Stacked Homes
Admin
5 months ago
Reply to  Tks

Hello Tks! The new loan is calculated as such: $700,000 (Valuation) – $175,000 (5% option fee + 20% completion fee) + $105,000 (Outstanding loan) = $630,000

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