Should You Finance or Pay Cash for Rental Properties?

Let’s say you’re willing to invest $600,000 in rental real estate. You find the average purchase price of a multifamily triplex (3 apartments) is $600,000, with rental income potential (after one-time renovations) of $6000 per month. You can buy the property in cash and have no mortgage, or you can buy 2 or 3 such properties by financing them. Let’s analyze the finances based on current interest rates of about 6.5% for a 30-year fixed-rate mortgage.

1 Triplex2 Triplexes3 Triplexes
Purchase Price$600,000$1,200,000$1,800,000
Down Payment (%)100%50%33.3%
Down Payment ($)$600,000$600,000$600,000
Mortgage (P&I) 10$3,792$7,590
Insurance + Taxes$379$758$1,137
Rental Income$6,000$12,000$18,000
Profit 2$5,621$7,450$9,273
Increased Profit ($)$1,829$3,652
Increased Profit (%)32.5%65.0%
Net Rental Yield (%)11.24%14.90%18.55%

1 The mortgage (P&I, or Principal and Interest) and the insurance and taxes are based on the Zillow mortgage calculator.
2 Profit in this calculation is just gross rental income minus large expenses, like mortgage, insurance, and taxes. It excludes water, garbage, business license, etc,)

If we ignore closing costs, which are a one-time cost and can be wrapped into a mortgage, we find that for the same $600,000 investment, we can make an additional

  • $1,829 per month if we buy 2 properties instead of one (32.5% increase)
  • $3,652 per month if we buy 3 properties instead of one (65% increase)

From a net rental yield perspective, which is annual profit divided by purchase price, the ratios for each case are 11.24%, 14.9%, and 18.55%. The yield if we buy just one triplex is already very good (11.24%), but the yield when we buy 2 or 3 triplexes is amazing!

Based on this simple analysis, we can see that for the same investment amount ($600,000), we can make significantly more money if we finance multiple properties rather than pay cash for just one property. But, the financial benefits don’t end here. Since the interest rate was 6.5% (current as of this writing), there is potential to make even more money if we refinance when interest rates drop. Let’s compare the numbers for interest rates of 5%, 4%, and 3%. Note that during the pandemic in 2021, it was possible to get a rate of 3% for a 30-year fixed mortgage on an investment property.

Interest Rate = 5%

1 Triplex2 Triplexes3 Triplexes
Purchase Price$600,000$1,200,000$1,800,000
Down Payment (%)100%50%33.3%
Down Payment ($)$600,000$600,000$600,000
Mortgage (P&I)0$3,220$6,444
Insurance + Taxes$379$758$1,137
Rental Income$6,000$12,000$18,000
Profit$5,621$8,022$10,419
Increased Profit ($)$2,401$4,798
Increased Profit (%)42.7%85.4%
Net Rental Yield ($)11.24%16.04%20.84%

If you refinance to a 5% interest rate, the rental yield for 2 and 3 triplexes jumps to 16.04% and 20.84%, respectively.

Interest Rate = 4%

1 Triplex2 Triplexes3 Triplexes
Purchase Price$600,000$1,200,000$1,800,000
Down Payment (%)100%50%33.3%
Down Payment ($)$600,000$600,000$600,000
Mortgage (P&I)0$2,864$5,733
Insurance + Taxes$379$758$1,137
Rental Income$6,000$12,000$18,000
Profit$5,621$8,378$11,130
Increased Profit ($)$2,757$5,509
Increased Profit (%)49.0%98.0%
Net Rental Yield ($)11.24%16.76%22.26%

If you refinance to a 4% interest rate, the rental yield for 2 and 3 triplexes jumps to 16.76% and 22.26%, respectively.

Interest Rate = 3%

1 Triplex2 Triplexes3 Triplexes
Purchase Price$600,000$1,200,000$1,800,000
Down Payment (%)100%50%33.3%
Down Payment ($)$600,000$600,000$600,000
Mortgage (P&I)0$2,530$5,061
Insurance + Taxes$379$758$1,137
Rental Income$6,000$12,000$18,000
Profit$5,621$8,712$11,802
Increased Profit ($)$3,091$6,181
Increased Profit (%)55.0%110.0%
Net Rental Yield ($)11.24%17.42%23.60%

If you refinance to a 3% interest rate, the rental yield for 2 and 3 triplexes jumps to 17.42% and 23.60%, respectively.

Conclusion

If your goal is to maximize ROI, then it should be clear now that financing the purchase of many rental properties is better than paying cash for fewer properties.

Compare Property Investments Using Rental Yield

There are many ratios investors use to compare rental property investments. To quickly estimate the profitability of an investment, I like to use price rental yield, which can be either gross or net.

  • Gross rental yield (%) = (annual rental income / purchase price) x 100
  • Net rental yield (%) = (annual rental income – expenses / purchase value) x 100

One popular measurement is the capitalization rate (cap rate), but it requires having detailed income and expenses, which are not necessarily available. It is similar to the net rental yield. The formula is

  • Cap rate (%) = (net operating income / current value) x 100

where

  • Net operating income = annual rental income – all operating expenses (excluding mortgage payments, depreciation, or amortization)

If you are buying a property, then the current value is usually the same as the purchase price.

According to AI, a “good” rental yield is between 5-8%. I personally target a gross rental yield of about 12%. Let’s see how to calculate rental yield on some properties.

Apartment building in Stockton, California

  • Zillow Listing
  • Address: 1135 N Sutter St, Stockton, CA 95202
  • 8 apartments
  • Each apartment is 1 bedroom, 1 bathroom
  • Total 4192 sqft (524 sq ft / apartment)
  • Zillow Estimate: $766,000
  • Sale Price: $800,000
  • Estimated rent for a 1 bd, 1 ba apartment in/around 1135 N Sutter St, Stockton, CA 95202 according to Rentometer: $1000
  • Actual rental income per listing: 4 units @ $1000 / month, 3 units @ $900 / month, 1 unit vacant
  • Cap rate per listing: 8.5%
  • Gross rental yield potential: (8 units x $1000 / month x 12 months) / $800,000 = 12%

This property has a potential gross rental yield of 12%, which is good. I would look further into this property as an investment.

Townhouse in Hayward, California

  • Zillow Listing
  • Address: 841 W Sunset Blvd #B, Hayward, CA 94541
  • 1 townhouse
  • 3 bedrooms, 2.5 bathrooms
  • Total 1448 sqft
  • Zillow Estimate: $713,000
  • Estimated rent according to Zillow: $3626
  • Cap rate per listing: details unavailable to calculate
  • Note: This property is in an HOA with monthly dues of $200 / month
  • Gross rental yield potential: ($3626 / month x 12 months) / $713,000 = 6.1%

The property has an estimated gross rental yield of only 6.1%, which is closer to the low end of the range of what is considered good. I wouldn’t bother considering this property as a rental investment.

Single-family house in Hayward, California

  • Zillow Listing
  • Address: 28578 Harvey Ave, Hayward, CA 94544
  • 1 single-family house
  • 3 bedrooms, 3 bathrooms
  • Total 1,709 sqft
  • Zillow Estimate: $971,800
  • Estimated rent according to Zillow: $3,862
  • Cap rate per listing: details unavailable to calculate
  • Gross rental yield potential: ($3,862 / month x 12 months) / $971,800 = 4.7%

At an estimated gross rental yield of 4.7%, this is not a good investment. However, if you convert the house into a co-living space, you can increase the rental yield as follows:

  • Convert 2-car garage into a JADU with 2 rooms, each of which can be a bedroom
  • Convert the family room into a bedroom
  • Depending on the house layout, it may be possible to convert other rooms into a bedroom

In doing so, the house would have at least 6 bedrooms, which, at $1000 of rental income each, would bring in $6000 / month, resulting in a rental yield of 7.4%.

Tasty Toasted Turkey, Egg, Cheese, and Guac Sandwich Recipe

This came out better than I thought, so it’s blogworthy.

Ingredients

  • French roll (I wish there were keto rolls, but they don’t seem to exist)
  • 2 eggs
  • Guacamole
  • 1 slice of turkey deli meat
  • 1 slice of cheddar cheese
  • Avocado oil spray
  • Salt and pepper

Directions

  1. Spray avocado oil in a frying pan
  2. Add the eggs, break the yolk, and cook to your preferred doneness
  3. Sprinkle the eggs with salt and pepper as desired
  4. Heat the French roll in a microwave for 20 seconds to soften it
  5. Spread a layer of guacamole on the bottom half of the roll
  6. Add the slice of turkey meat on the guac
  7. Add the scrambled eggs on the turkey slice
  8. Cut a square slice of cheddar cheese in half and place it over the eggs lengthwise
  9. Spray the base of your air fryer basket with avocado oil (optional)
  10. Fold the sandwich roll and place it in the air fryer basket
  11. Spray a bit of avocado oil on the top of the sandwich (optional)
  12. Place a metal air fryer rack on the sandwich to prevent it from unfolding
  13. Air fry at 390 degrees for 2-3 minutes

Photos

Delicious Egg, Cheese, Turkey, & Guac Air-Fried Sandwich

Ingredients

  • 2 slices of French sourdough bread (Costco Business Center sells a 2-pack of sourdough bread loaves for just $7. Each slice is square, not oval, so each slice is the same size). You can also try soft Ciabatta bread, available at both Costco and Costco Business Center.
  • 2 eggs
  • 2 slices of turkey deli meat
  • 2 slices of cheddar cheese
  • Guacamole
  • Avocado oil spray
  • Salt and pepper
  • Mayonnaise

Directions

  1. Spray a frying pan with avocado oil, add the eggs, and fry them to your desired doneness, optionally adding salt and pepper or other spices.
  2. Spread mayonnaise on one side of each sourdough bread slice. This side will be the outside.
  3. Spread guacamole on the other side of one slice of bread
  4. Add the eggs on top of the guacamole
  5. Add the cheese slices on top of the eggs
  6. Add the turkey slices on top of the cheese
  7. Add the other bread slice on top of the turkey slices (mayo side up)
  8. Place the sandwich in an air fryer and air fry at 390 degrees for 5 minutes
  9. Enjoy

Healthy, Keto-friendly Quesadilla in an Air Fryer

The other day, I went to El Pollo Loco and had their chicken quesadillas with avocado salsa verde. It was delicious, so I sought out how to make a healthy version at home using my air fryer. Though my version doesn’t taste as good as El Pollo Loco’s, it’s healthier, still tastes pretty good, and is much cheaper. For the salsa, I found one that tastes almost the same as El Pollo Loco’s. Here’s my recipe.

Ingredients

Directions

  1. Heat the precooked chicken breast strips in a microwave
  2. Spray avocado oil on the air fryer basket
  3. Place a tortilla in the air fryer
  4. Put cheese on one half of the tortilla
  5. Place some chicken breast strips over the cheese
  6. Top the chicken strips with more cheese
  7. Fold the other half of the tortilla over the first half
  8. Spray avocado oil on the folded half
  9. Keep the tortilla from unfolding by either sticking a toothpick through both sides of it or placing a metal air fryer rack over it
  10. Cook at 390 degrees F for about 4 minutes
  11. To consume, dip it in the guacasalsa or spoon some guacasalsa on it

How to Visually Peek Behind Drywall

Most of the time, stud finders are sufficient to tell you what’s behind some drywall since most drywall just has 2×4 wood studs behind it. But what if you’re still unsure of what’s really behind some drywall. Here’s a simple way to visually peek behind drywall without making a mess or giving yourself a lot of work.

1. Get a borescope inspection camera

I have this one and I think it’s good.

2, Drill a one-inch hole in your drywall.

You can use a 1″ spade bit.

3. Stick your inspection camera through the hole

You should now be able to see what’s behind the wall.

4. Prepare to patch the hole

Get some joint compound and a joint knife.

Buy at Home Depot
Buy at Home Depot

5. Spread the joint compound over the hole

Some compound may ooze out the back. That’s okay.

6. Wait 24 hours and add more compound

7. If necessary, repeat step 6 again

8. Sand, (texturize?), and paint

Note: When the joint compound dries, it will become very hard, and you can probably stick a nail or screw in it to hang something. For a one-inch hole, to keep things simple, I didn’t use any joint tape, and this method worked just fine without it.

A 3-minute Cheaper and Healthier Chicken Sandwich

Chicken sandwiches are very common at fast-food restaurants. They taste good, but you have to drive there, wait in line, and pay between $4 to $6 for just one sandwich. In this post, I share a better chicken sandwich that only takes literally 3 minutes to make at home. First, let’s take a look at some popular fast-food chicken sandwiches.

KFC’s Chicken Sandwich – $3.99

Popeye’s Chicken Sandwich – $5.99

McDonald’s McChicken – ~$4

McDonald’s McCrispy – ~$5

Burger King’s Royal Crispy Chicken – $8

Chick-fil-A® Chicken Sandwich – $6.59

Note: all of the sandwiches above look good in the marketing pictures, but when you get them, they don’t always look that great.

Now, here’s my recipe for a better and healthier chicken sandwich that only takes 3 minutes to make at home.

Ingredients

Instructions

  1. Take one of the frozen chicken breast fillets and heat it up in a microwave for 3 minutes
  2. Optionally, place a slice of cheese on the chicken and melt it in the microwave
  3. Spread some mayo on both sides of a keto bun
  4. Place the heated chicken fillet in the bun
  5. Eat

For a lower-calorie alternative, replace the mayo with Kinder’s Zero Sugar BBQ sauce, which uses no artificial sweetener.

Note that Kirkland frozen chicken breast fillets are

  • Fully Cooked
  • Have No Antibiotics Ever
  • Have No Artificial Ingredients or Preservatives
  • Boneless and Skinless
  • Have 22g Protein per Serving

If you do the math, one sandwich costs about $2 each.

Panini Sandwiches Using an Air Fryer

Panini sandwiches are usually made with a panini press, but I’ve found that using an air fryer is easier and better. Here’s how to make a turkey and cheese panini sandwich in an air fryer.

Ingredients

  • 2 slices of turkey
  • 2 slices of mozzarella cheese
  • 2 slices of bread (sourdough, etc)
  • mayo

Instructions

  1. Preheat the air fryer to 400 F
  2. Spread mayo on one side of each slice of bread
  3. Assemble the sandwich as follows
Bread slice (mayo on outside)
Turkey slice
Cheese slices
Turkey slice
Bread slice (mayo on outside)
  1. When the air fryer is preheated, set the time to 10 minutes and place the sandwich inside
  2. After 5 minutes, flip the sandwich
  • Increase or decrease the frying time to suit

Here are some ingredient options for making different panini sandwiches. The ingredients are listed in the order of the sandwich layers.

Meatball and cheese panini

  • mayo
  • bread slice
  • meatballs cut in half
  • pizza sauce
  • mozzarella cheese slices
  • bread slices
  • mayo

Chicken and cheese panini

  • mayo
  • bread slice
  • grilled chicken strips or sliced lightly breaded chicken breast
  • pesto sauce
  • roasted tomato
  • mozzarella cheese slices
  • bread
  • mayo

Turkey and cheese panini

  • mayo
  • bread slice
  • turkey slice
  • cheese slices
  • tomato slices
  • turkey slice
  • bread
  • mayo

BBQ chicken and cheese panini

  • mayo
  • bread slice
  • cheese slice
  • shredded chicken
  • bbq sauce
  • bread
  • mayo

Kebab and cheese panini

  • mayo
  • bread slice
  • cheese slice
  • kebabs
  • tzatziki sauce
  • tomato
  • bread
  • mayo

Beef brisket and cheese panini

  • mayo
  • bread slice
  • cheese slice
  • beef brisket
  • bread
  • mayo

Corned beef and cheese panini

  • mayo
  • bread slice
  • cheese slice
  • corned beef
  • bread
  • mayo

Following are different types of pre-cooked meat you can put in your panini and their prices.

$13 / lb at Costco
$10 / lb at Costco
$8.48 / lb at Costco
$13 / lb at Costco
$14 / lb at Costco
$6 / lb at Costco
$3.32 / lb at Costco
$12 / lb at Costco
$5.60 / lb

Explore Places On a Bike/Scooter With a GPS Bike Route

I recently picked up an e-scooter and have been having fun scooting around on it. Now, I want to explore more places and make animated route maps. To do this easily, and to film my rides, I’ve come up with the following setup and process.

The Scooter (and accessories)

I have the HiBoy S2 electric scooter with seat.

I strapped a 10′-selfie stick to the back so I can take footage like this.

I used two short ratchet straps.

I installed this U-bolt mount on the handlebar to mount another selfie stick to get footage from the side like this.

and like this

depending on the angle and length of the stick.

Here’s what the U-bolt mount looks like.

For the camera, I use the Insta360 X5. Since it’s a 360-degree camera, it can capture everything around you.

Make sure to get a handlebar phone mount, like the one below, so you can easily see turn-by-turn directions on your phone.

Next time, I might get this more powerful scooter instead.

Create a Bike Route

To create a bike route, I like to use the Ride With GPS website. Create a free account and then click “Plan a Route”. By default, you will see something like this.

I like to change the map from “RWGPS” to “Google Map”.

Let’s say we want to create a bike route in Golden Gate Park. Type “Golden Gate Park” in the “Location” field and choose one of the matches.

The map will show a location in Golden Gate Park.

Check “Bike Paths”.

You should now see a bunch of dark green lines representing bike paths.

Let’s start the bike route at the Conservatory of Flowers. Search for it in the location field. A popup will appear on its location on the map. Click “Start route here”.

There’s a legend showing you the various surfaces. Paved trails are solid. Unpaved trails are dotted. Plain trails are unknown.

Let’s ride from the Conservatory of Flowers to Rideout Fountain. Click on a path by the Rideout Fountain. RideWithGPS will automatically create a travel segment following paved bike trails between those two locations.

If you make a mistake, you can click the left arrow to undo your changes.

Now, let’s go to the Music Concourse and the Japanese Tea Garden. Click on the paths near those locations to continue the route.

Since there is no direct path from the Music Concourse to the Japanese Tea Garden, Ride With GPS shows the route going backward a bit before making a U-turn to head to the Japanese Tea Garden.

Now, let’s ride around Blue Heron Lake and across Strawberry Hill. Click on points along paths where you want to go. This is what I came up with.

Now, let’s see if we can ride through the San Francisco Botanical Garden. Click on points on various paths where you want to ride your bike/scooter. Since the bike paths aren’t all connected, the following is what Ride With GPS gave me.

Now, let’s ride to the California Academy of Sciences and then head back to the starting point (the Conservatory of Flowers). This is what I got.

Click Save and name the route.

Click “View Route”. You will see the entire route, the elevation, and the total distance (4.1 miles).

You’ll also see the distance and percentage on paved and unpaved trails.

You’ll also see the cuesheet, showing turn-by-turn directions.

Create an animated route video in AvoMap

In Ride With GPS, click “Export GPX File” and download the .gpx file.

Go to AvoMap.com, create a free account and log in. You can create a video by specifying waypoints, or you can upload a GPS file. Since we already created a route and we have a GPX file, click “Upload GPS File” and select the .gpx file you just downloaded from Ride With GPS.

You should see something like this.

Now, on the left, you can adjust various settings, e.g.

  • change units from metric to imperial
  • enable “Dynamic camera”
  • add “Fly-in” animation with a duration of 8 seconds, a zoom level of 100 km
  • add “Fly-out” animation with a duration of 8 seconds, a zoom level of 100 km
  • “Traveled Distance” activated
  • Elevation enabled with “Chart background” disabled

If you buy credits, you can export the video, which would look something like this.

Get Turn-By-Turn Directions

When you’re about to go on your ride, you can get turn-by-turn directions using the Ride With GPS mobile app. However, this is a paid feature. If you don’t ride often, you can buy the monthly subscription for $10 a month and just cancel before the end of the first month.

Recording Your Ride’s GPS Data

When you ride, you may not necessarily follow your planned route. If you’d like to track your actual route taken, you can record your GPS data live while you’re riding. You can do this with the paid version of the Ride With GPS mobile app or with the free Geo Tracker Android app. Just tap the red record button to start logging your GPS data, including while the app is running in the background. When you’re done, tap again to stop recording. You can then export the GPS data in GPX format, which you can then import into AvoMap to create a video.

Convert a Google Map to GPX

If you want to create a travel route using Google Maps and then make a video in AvoMap using the Google Maps route, just create directions in Google Maps, optionally with multiple stops, and then copy and paste the URL into https://mapstogpx.com/. Download the GPX file and upload it to AvoMap.

E-scooter Riding Laws in California

  • Must have a driver’s license
  • May not ride on any sidewalks
  • Must ride on designated bike lanes
  • May ride on car roads where the speed limit is < 25 mph
  • E-scooters are not allowed on the Golden Gate Bridge, but e-bikes are allowed on both sidewalks.
  • E-scooters are allowed only on designated bike paths in Yosemite National Park, whereas e-bikes can be used on both bike paths and park roads. Learn more

Yosemite Resources

Bike Path Map

San Francisco Resources

San Francisco is a foggy city. If you want to go riding in San Francisco, it’s best to check the hour-by-hour weather and live views before you go.

Quick ‘n Easy Fried Rice Recipe

Ingredients

  • 1 cup of Jasmine rice
  • 1.5 cups of water
  • 2 eggs
  • Cucumber
  • Tomato
  • Cilantro
  • Green onion
  • Instant Seasoning Paste for Fried Rice (There are many seasoning packets for fried rice, but I like this one the most)

Instructions

Note: if you cook the rice wrong, it will come out mushy. Carefully follow the rice-cooking instructions if you want the rice to come out good.

  1. Place the rice in a fine-mesh sieve or colander and rinse under cool running water. Gently stir the rice as you rinse. Keep rinsing until the water runs clear. This is critical for removing excess surface starch, which is the primary cause of gummy or mushy rice.
  2. Put the rice in a deep pan.
  3. Add the water to the pan and lay the rice out evenly. Note that adding too much water will make the rice mushy.
  4. Cook on medium until the water boils.
  5. Cover the pan with a lid, reduce the heat to low, and simmer the rice for 15 minutes or until all the water is gone.
  6. Turn off the heat and let the rice rest for 10 minutes with the lid still on.
  7. After resting, gently fluff the rice with a fork to break up any clumps and create individual, separate grains. Avoid stirring the rice while it’s very hot and moist, as this can cause it to break apart and become mushy. 
  8. Add chopped green onion, cilantro, and the seasoning paste to the rice and mix.
  9. Cook 2 eggs (I prefer sunny side up)
  10. Transfer the rice to a plate, put the eggs on top, and garnish with some chopped cilantro.
  11. Add slices of cucumber and tomato to the plate.
  12. Enjoy
The rice while cooking
The cooked rice (notice it’s not mushy)
The rice after adding green onion and the seasoning paste
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