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All Forum Posts by: Bonnie Low

Bonnie Low has started 23 posts and replied 1941 times.

Post: Investing in a new build home

Bonnie Low
#1 Medium-Term Rentals Contributor
Posted
  • Lender
  • Asheville, NC
  • Posts 1,976
  • Votes 1,798

A couple of additional things to consider: if you're getting into contract for a new build, beware of building slow downs and rapidly rising prices for construction materials. Make sure your contract locks you in at the agreed upon price. Many contracts now contain clauses that basically say the costs can adjust upwards with the price of materials, which is totally understandable if you're the builder, but could bite you big time if you're the buyer. 

Post: HELP!!! My financial advisor said I'm over leveraged

Bonnie Low
#1 Medium-Term Rentals Contributor
Posted
  • Lender
  • Asheville, NC
  • Posts 1,976
  • Votes 1,798

I have heard so many people in the real estate and financial independence fields recount stories about financial advisors giving really poor advice that I tend to shrug off things like this as coming from someone who is outside their area of expertise. That's just my opinion, but I'd encourage you to dig deeper into his recommendation if you're really concerned. Remember, he's getting zero management or brokerage fees from your real estate investment, whereas he would probably make a fee of some sort if you sold off some off that real estate and invested it in his managed products. So there's that. Secondly, is he saying he's concerned that you're not diversified enough - i.e. too much real estate compared to other investment strategies? (again, this is highly subjective) Or is he saying each property is too highly leveraged (i.e. very little equity in each home making the property value more volatile subject to market fluctuations). If you have more than one property, chances are you have at least 20% equity in each since conventional loans require 20% thereabouts for common down payment on second, third, fourth properties etc. If so, you have a built in minimum 20% hedge against market volatility if the market goes down. How knowledgeable is he about real estate and, specifically, housing valuation in the specific markets in which you hold your properties? Is he aware of what kind of operating expenses and cushion you have set aside for each of your leveraged properties to cover things like vacancies? If you have a healthy cash stash for each property, you can weather down turns and unexpected events more easily regardless of how leveraged you are. Finally (and this is just my opinion), your properties have tangible worth and provide a hedge against inflation, which is far more than can be said for over valued stocks run amok in an economy where government policy is to print money, thus forcing devaluation of the dollar. While I believe in diversity, real estate (to me) is still the safest investment vehicle. You can also look to achieve diversity within asset classes of real estate. And leverage can be a beautiful thing with interest rates as low as they are now. Like so many things, there's not one simple answer that works for all of us. Just some thoughts for you to consider if you want to have another conversation with your financial advisor.

Post: How Do I Avoid This Wholesale Paradox?

Bonnie Low
#1 Medium-Term Rentals Contributor
Posted
  • Lender
  • Asheville, NC
  • Posts 1,976
  • Votes 1,798
If you have a great deal, you will have a cash buyer. Go to your local REIA to make contacts with buyers in your areas. Finding the deal is much harder than finding a buyer. The caveat to that, though, is make SURE it's a great deal. Be very confident in your numbers. We find wholesalers tend to struggle primarily with doing a good job of accurately estimating rehab costs. Talk to your end buyers to find out what, exactly, they're looking for so you can be sure you're bringing them deals they're interested in. Case in point, we've provided a lot of parameters for our wholesalers and yet they still continue to bring us "great deals" that are not in our wheelhouse (i.e. mobile homes, properties not on City sewer and water). It also helps to do some walkthroughs with a potential buyer before you make your offer to the owner so you can see through the buyer's eyes what they're looking for.

Post: I am Shaking In My Boots

Bonnie Low
#1 Medium-Term Rentals Contributor
Posted
  • Lender
  • Asheville, NC
  • Posts 1,976
  • Votes 1,798

@Robert Williams - first, WELCOME! You've come to the right place. Most people here are very encouraging. Second, what are you interested in? Are you considering buying a property you can house hack? Do you have carpentry skills and would be interested in buying a live-in flip (this could be an option to finance with a very low interest rate and very low down payment FHA loan if you're doing owner occupied). Are you willing to stick your neck out there and talk to people and therefore might be a good fit for wholesaling? I would recommend you find a local Real Estate Investor's Association (REIA) and start networking. I find that the people who show up and say 'I'm new, I'm open to all advice and I really want to learn' get a lot of support from more experienced people. You might even find someone who is willing to partner with you on a deal for a small equity stake since you don't have cash to bring in but you have the work ethic and the willingness to do all the things they don't want to do. Also, talk to a lender so you know what you're qualified for so if you do find something you're in a position to make an offer. If you need more support, listen to the Real Estate Rookie podcast. You can draw a lot of inspiration from people just like you - there was just a 19 year old wholesaler on the program who is seriously impressive! You just need to take a little bit of action every day. When my boys are feeling overwhelmed at anything in life I always ask them 'how do you eat an elephant?' The answer is, one bite at a time. Small steps every day add up. You'll get there if you really want it!

Post: Lender Says he can call note due at any point!

Bonnie Low
#1 Medium-Term Rentals Contributor
Posted
  • Lender
  • Asheville, NC
  • Posts 1,976
  • Votes 1,798

@Shivam Patel it's clear you're trying to do the right thing and also to do your due diligence. Financing can be very confusing, so don't feel bad that you have these questions. I also think you probably have some time - that is, there's no sign interest rates are going up significantly any time soon in my opinion. To qualify for FHA owner-occupied financing you have to intend to live there at the time you take out the loan but circumstances can and do change - job changes, marriage/divorce, illness and other reasons for relocation so it is not uncommon for someone to leave a home they originally financed as owner occupied. If I understand what you're describing, it sounds like your lender is being particularly aggressive and probably does not want you to refinance out of his/her loan product, though that is your choice. If you're using the same lender from your original owner occupied purchase and trying to buy another owner occupied property through that lender, of course this is going to raise red flags and they're required to read you the rules. It may not be legal or even advisable to have more than one owner-occupied rules but I can tell you there are many people who do - some for legitimate reasons and some not so much.

Post: Should I jump into a major rehab with the cost of materials

Bonnie Low
#1 Medium-Term Rentals Contributor
Posted
  • Lender
  • Asheville, NC
  • Posts 1,976
  • Votes 1,798

It's risky, for sure. We're currently not doing any flips but we're still buying long term properties that require significant repairs. We had stopped doing flips after 2018 because there were just too many investors living the Chip & Joanna life paying too much for properties and driving up the acquisition price on flips. But the buy and hold investments are a longer term play so you have more time to recoup your investment. That said, the numbers are still critical to the deal so you really have to have cushion. We're giving ourselves a 25-30% cushion over and above our estimated costs where previously we gave ourselves 10-15%. And yes, this is definitely slowing - but not stopping - our acquisitions. One other thought: I don't know if this is also a problem where you're at but ALL of our trades are booked out solid for months. This is due to the massive CA wildfires over the last few years and builders having more work than they can handle doing the rebuilds. It is really hard to get a commitment if you don't have prior relationships. So you also have to factor in extended holding costs if you're doing the BRRRR method. So it's not just the increase in material costs you have to take into consideration. It's challenging, but obstacles are meant to be overcome.

Post: Investing in Rental - Sandusky, OH

Bonnie Low
#1 Medium-Term Rentals Contributor
Posted
  • Lender
  • Asheville, NC
  • Posts 1,976
  • Votes 1,798

@Alex M. - I'm looking at Sandusky, Port Clinton and some other northern (to me) cities. I'm curious about your statement that the deals are usually C or worse neighborhoods. Did you mean that what you've purchased has been in C or worse, or are you classifying the whole of Sandusky as C or worse? Are you still in this market?

Post: Questions About Financing All Cash Offer On Single Family Home

Bonnie Low
#1 Medium-Term Rentals Contributor
Posted
  • Lender
  • Asheville, NC
  • Posts 1,976
  • Votes 1,798
There are a lot of people looking to park cash somewhere they feel is safer than banks or the stock market, especially foreign investors. I listened to an interesting podcast recently - I think it was the Afford Anything podcast - where an American ex pat couple living in Japan are buying in the US because interest rates are negative in Japan and properties actually depreciate. They don't care about using someone else's money or refinancing. They just want a safe place to park their $ and have faith it will grow safely via appreciation in the US housing market and generate cash flow.

Post: Expensive repair on rental. Should I do it?

Bonnie Low
#1 Medium-Term Rentals Contributor
Posted
  • Lender
  • Asheville, NC
  • Posts 1,976
  • Votes 1,798

You're definitely going to want to repair that. It's a lawsuit waiting to happen. But I would spend the time to call around to some concrete and paving contractors to get your own quote. PM companies are notorious for not shopping around and for padding their repair quotes.

Post: First flip completed 2018

Bonnie Low
#1 Medium-Term Rentals Contributor
Posted
  • Lender
  • Asheville, NC
  • Posts 1,976
  • Votes 1,798
Thanks @Dmitriy Fomichenko! Looking back, that was the one that got us started ; )