All Forum Posts by: Bonnie Low

This is great information, Andy. Thank you for sharing! We had an offer accepted on a short sale that went nowhere. Every once in a while we'd get an update from the bank, but it was usually along the lines of 'your file has been transferred to another banker.' Occasionally, we'd hear that the owner had made an effort to catch up on the payments so we were never sure whether or not it was actually going to go through. Eventually, we pulled out. 3 years later it recently came back on the market....as a short sale (!) I always wondered whether there was something we could have done to get it moving. It definitely left a bad taste in my mouth for short sales, but your story reminds me that where there's a will, there's a way. 

Hi, Centhia & welcome! I've worked on developing daily habits not only to help with my investing, but to help with life in general. First and foremost, I meditate every morning. This has more to do with my health journey than anything else, but it absolutely helps with every aspect of my life. I use the Ziva method, which can be as short as a 5-10 minute meditation that ends with a manifestation. Sometimes that manifestation is about a life goal and sometimes it's about a business goal, but it's important to train your brain to think "I have 10 rental properties that have allowed me to quit my job" rather than "I want 10 rental properties that will allow me to quit my job." Luckily, I've worked from home for the last 10 years so I'm able to set my own schedule which allows me to get in some exercise first thing in the morning. This gets my blood oxygenated and jump starts my brain (I also take a Lion's Main supplement for brain health every day). Beyond that, my husband and I do a quarterly business retreat where we get away for a weekend where we can focus on our business goals with no distractions around. We've tried to do it from home and we always succumb to distractions so we're now very strict about making sure we get away to do our planning. In our quarterly retreat we set goals for the next quarter and we check in on our progress against last quarter's goals. Inevitably, there is a to-do list and a time chart that comes out of our quarterly retreat so I check my progress against my to-do list every day and that keeps me on track. Some of the to-dos are very tactical, like 'schedule checkup with CPA.' But some are more aspirational, like 'analyze at least one deal per day.' I set that last one as a personal development goal because I want to be able to quickly analyze a property with or without the use of a calculator. By doing it every day so far this year, I find I can already do many calculations in my head that I previously would have had to use the BP calculator or other tools for. 

Anyway, that's what I do. I'll be interested to see what others say because I always pick up good ideas from other folks here on BP. Wishing you success!

Here are a few thoughts: your income is good and your credit is great, so you have both of those going for you. How's your debt-to-income ratio because that's the other big factor lenders are going to look at. Personally, I wouldn't have put 20% down on a primary residence because it ties up your cash, but I'm assuming you didn't want to pay PMI. While that 20% gets you out of PMI, it doesn't leave enough equity in the deal to pull any cash back out because most lenders are wanting you to have at least 25-30% equity in order to do a cash out refi.

Since you have a good job, do you have a 401k? If access to cash is holding you back, consider taking a loan from your 401k to use for your down payment on your next property. I've done this a few times. At 5% interest, it's higher than an FHA loan but lower than almost anything else and I pay that interest back to myself.

Are you wanting to stay in your current property or would you consider renting it out? You could go with an FHA loan on the next one and only put 3.5% down, reducing your cash out of pocket to get into it but you have to be willing to owner occupy, at least for a year or two (though circumstances can and do change - you just have to go in with the intent of owner occupying.)

Have you considered buying a distressed property and doing a BRRRR? You could use a hard money lender to get into the property, rehab it and pull most or all of your $ back out. You may find a HML willing to lend up to 100% of the purchase price - they exist but fees tend to be high - you just have to shop around.

You mentioned your folks may buy you out eventually. If they have the $ to do that, would they consider lending you the down payment on another property or going in partners with you on the next one? There are lots of ways to get into another property if you get creative. And remember that you're not limited to just one method. Consider a combination of options. For example, you get a HML to fund 80% of the purchase price of a distressed property. You you ask your folks to front the 20% down payment and you use a 401k loan to fund repairs. If you haven't already, check out Brandon Turner's book on investing with low and no money down. If you don't have a lot of cash sitting around but want to keep building your portfolio, you have to get creative. You're only limited by your creativity and your risk tolerance.

Have you considered doing a cash out refi? If you haven't refinanced lately you may be able to substantially lower your interest rate and walk away with cash to use without raising your mortgage payment too much, which would allow the property to still cash flow if you decide to rent it out. While you get the cash with a HELOC, you're probably going to pay a higher interest rate than a primary mortgage today. I'd run several different scenarios - sale, cash out refi, HELOC and compare the outcomes. You can use the BP BRRRR calculator to figure out the cash out refi numbers. Just enter $0 as the repair costs.

This is a great write up. It's so much more helpful to hear about issues from the source rather than just speculators with an opinion. As a company that does extensive remodels, we're watching the price of materials very closely and are proceeding with caution. Labor has been an issue, too. It seems some of our go-to contractors haven't adjusted their labor prices up as much as you'd expect given the scarcity, but we're definitely seeing a pinch in the availability of labor. This means your job takes longer, your carrying costs go up and you pray the market on the other end will support it. Thanks again for this really helpful perspective!

Call someone at the City Building department to get answers to all of your questions. Your Realtor probably won't be able to help you and most would give you advice with a heavy dose of disclaimer. I'd also be concerned about your Realtor. They shouldn't be short with you and they shouldn't be pushing you. Those are big red flags. You need someone who has your best interests in mind, especially if you are looking at that person to be part of a team you can do future transactions with. 

Good to know. Thanks!

Like others said, it's a lot of information. I'm not sure why anyone would need all of this other than possibly a big syndicate planning to build developments or city planners looking at housing trends to help understand development revenues and infrastructure need. For the average investor on BP it would definitely be overkill and lend itself to analysis paralysis. For my purposes, city by city comparison data is more helpful when looking at where to invest - but by the time I've selected an area, I don't then need to go this deep. Particularly, some of the graphs that pull in data as far back as 1990 or even 2000 aren't helpful, either. Really, if it's not since the post-housing bubble of 2008, it doesn't feel that relevant. I'd be most interested in key metrics about inventory, employment, growth, housing prices, major employers and rental housing data.

You should absolutely use a real estate attorney and consult a CPA who is familiar with the tax implications for both you and your father. It sounds like an excellent opportunity for you, but proceed with caution to protect the asset and get the most out of the benefits.

We have basically used 401k loans like a form of hard money. Use them quickly, refi back out of the property and pay them back, then use them again. Unlike hard $ loans, they're incredibly low interest. We're both paying 5-5.25% on loans from our 401ks. For my company, the max loan is 50% of your 401k value OR $50k, whichever is greater. It's incredibly easy to borrow - I apply online, get an instant answer and then the funds are automatically deposited into my checking account in 3-5 working days. No credit check, no debt-to-income verification, and the loan doesn't show up on your credit report, which can be huge. The downside is that you can't modify your loan repayment. You can pay it off early without penalty, but you can't make a large principal payment and expect it to drop your monthly required payment. And, of course, if you take that $ out of your 401k, it's not earning in the stock market while you're using it on your project. That is actually one of the biggest reasons we use it the way we do. Neither of us has any faith in the stock market. I'd rather have that money in my hands creating a healthy COC return than have it be subject to the volatility of the stock market, especially considering how fragile our monetary system is right now.