New Member In Houston, Looking For Advice On Optimizing My Cash

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New Member In Houston, Looking For Advice On Optimizing My Cash

Danny N.
FLL · Member since 2016 · 98 posts · 20 votes

Hi, Im new to the forum, I own alot of properties but Im not too savvy with the financial side of things real estate. I found this forum on accident stumbling around and I'd like to learn more about the various types of loans and products I could/should use from some experts. I don't know why but I just dont like talking with my banker much, Im a small business owner, so I just hate dealing with the banks it always stresses me out. Anyways here is my personal balance sheet:

Main Residence - $1.4M value paid $450k in 1996, $235k mortgage today

Vacation Home - $700k value paid $450k in 2012, $240k mortgage today

Rental Home - $65k value, paid off $900/mo rent 

Rental Home - $50k value, paid off $600/mo rent

Rental Home - $65k value, paid off $700/mo rent

Empty Residential Lot - $300k value, paid off

Cash available - $400-500k 

Net worth - $2.5M give or take aside from my business but thats separate

My income is $15,000/mo on the taxable side of things and what Im looking to do is buy more properties to rent out but with minimal cash outlay. I know mortgages are such a tedious process so Im wondering in my situation is it better to take my cash and pay off my 2 mortgages or use that to buy more rentals and if it is buy more rentals, whats the best way to borrow when you dont have a high income and you have those 2 mortgages hanging over your head? I have good credit over 800, and have 30+ years of owning my own business on my side. 

What would you do in my situation to best utilize the cash on hand and/or refinancing some of the properties I listed. Are there ways to roll all the assets into 1 loan? 

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  • Danny N.
    OP
    FLL · Member since 2016 · 98 posts · 20 votes
    9y

    Also with the 2nd home forgot to mention, what worries me about seeking out another loan is the mortgage on that property is supposed to be owner occupied Im not sure why it is that way but it is, and my son is actually the one who lives there and pays the mortgage,maintenance,taxes every month which is around $3,000/mo so if I were to borrow I dont know if that would be a rental home or what but he pays me $3000 every month on the 1st and lives in the home so its not really a vacation home losing money every month and more of a rental property you could say.

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  • Account Closed
    Investor · Princeton, TX · Member since 2014 · 1k+ posts · 1k+ votes
    9y

    @Danny N.

    The cheapest mortgages you will be able to get will be on your first and second homes.  I would not pay them off.  I would suggest looking for good deals.  Use some of the cash you have to buy more rental properties.  At your current level of performance you might be able to get another seven houses.  That would be another $5,133 a month in rents.

    By the way... if you are planning on taking loans on any of the rental property its extremely important to document rent collection.  Make sure you are depositing the money into a bank account as they are collected.  I would certainly do this on the property where your son is living.  You should check the mortgage documents.  I am guessing the owner occupancy requirement has lapsed.

    If you decide to increase leverage, the equity in your home might be the best choice.

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  • Danny N.
    OP
    FLL · Member since 2016 · 98 posts · 20 votes
    9y

    Thanks Michael, I've always tried to pay cash for the rental homes, but I know there are better ways to leverage and buy more and Im hoping to learn more about better options for a guy like me with a decent balance sheet + good credit score. I know I could buy more of these cheap rental homes and the ROI on them is great but they dont appreciate at all, one I paid $52k for in 2002 and its maybe $65k today but its made me alot of rental income over the years. Would prefer something more high quality with both appreciation and rent. I know my income isn't that high because im in the restaurant business and there is alot of cash too so income is well higher than whats taxable. I've had obstacles getting loans in the past and thats why im asking about loan options for me bc I dont have alot of wiggle room bc my last loan funding docs has this

    $14,151 total income

    $2,879 1st mortgage

    $287.40 Hazard Insurance

    $1404.74 Real Estate Taxes

    $1268.09 mortgage on 2nd home

    $76.67 hazard insurance

    $438.22 real estate taxes

    $691 association fees bc its a condo

    So that has my total monthly expenses at $7,045.12 and you know how strict banks are now as thats half my income on both properties but as I said my son is paying all bills of the rental condo but im afraid to show it as a rental bc i think thats against the rules of the loan.

    Anyways thats why I was asking how to get creative with my assets and limited income available to borrow based off the 2 loans I have existing. Thank you again

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  • Danny N.
    OP
    FLL · Member since 2016 · 98 posts · 20 votes
    9y

    also my sons income is $117,000 perhaps I could sell him the condo to free up room in my income? What would he need to earn if I was to sell it to him for say $450k even though market value is $700k? I paid $450k for it. He's only out of school 2 years so I know he doesn't have much saved for downpayment.

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  • Kevin McLaughlin
    Houston, TX · Member since 2016 · 3 posts · 3 votes
    9y

    @Danny N. If you consider selling it to your son at a below market price, there are tax ramifications, so be sure to talk to you accountant / tax advisor before you go that route.

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  • Danny N.
    OP
    FLL · Member since 2016 · 98 posts · 20 votes
    9y

    Thanks Kevin, is that not allowed? What if someone is a distressed seller and they need to unload a property. Im not, but Im saying hypothetically. Also someone just sent me a message on here about using my 3 rental homes and the land I have for a portfolio loan? Could someone explain those to me bc I've never heard of them. How exactly do they work and what are the terms. I don't even mind throwing in my condo my son lives in under investment assets in a portfolio loan bundle but its in a different state and my bank, chase, may not work with it. Thank you

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