All Forum Posts by: Brandon Elliott-Pandey

Hey Joe, appreciate the thought. I happened to mention at the end it is cash flowing quite well. This year it will have a ~65% COC return. That's why it would be hard pill to swallow on the sale...

I've also heard a few stories about persons whom have sold their real estate and wished they kept it. Have you happened to sell any in the past and how did you fair after those sales??? Any remorse?

Will make the long story short here but if you want all the details feel free to read the whole story and number breakdown below!

I have a rental that was purchased in 2020 and the loan is around ~320k. The comps support about a $450-$470k price point. I could finish the basement for potentially $30-40k (maybe less) and the ARV would be somewhere closer to $510-$525k.

What is the best way to tap into that potential ~$100k of equity between a HELOC or Cash our Refi?

Story time!

I am a firm believer in the long term wealth that real estate creates, therefore I am a buy and hold type investor. I have had this rental for 3 years and plan on continuing to have it until the numbers just don't make sense. Right now if I were to cash out refi I would get somewhere around ~$50-70k and change my interest rate from a 2.5% to the going market rate. (Roughly 7-8%)  For now it's used as a mid-term rental and the cash flow would support a monthly payment like that but after the mid-term lease is up I'm not confident I would be able to place another mid term tenet and have to resort to long term as it was originally intended and the rents may not support the monthly payment at that time. (Negative cash flow) The home is in a prime location in CO and still has lots of appreciation potential. That said I am contemplating taking out a HELOC and being able to tap into the equity. I'm just not the biggest fan of having to pay more interest on the money borrowed rather than having one monthly payment.... I've done some digging and have found a HELOC company that utilizes a sweeping account and uses the HELOC to pay off the original mortgage and take fist lien position. Meaning I now have a HELOC instead of a mortgage and can tap into the line of credit at any point I want. This is far more intriguing to me and has me at a toss up between the two options. 

If you were in this potion where your rental is cash flowing at a 65% Cash on Cash return with a 2.5% interest rate. What would you do?

Cash out refi and pull out the equity and take the higher payment that the long term rents may not support 100% (Mid term lease is up in May) or get a special HELOC that pays off the existing mortgage and allows you to use the line of credit as you see fit (and of course you'd still have a monthly payment at that point since the HELOC is now the mortgage and whatever the difference between the limit and your balance is the available line of credit)

Also, if I finish the basement that could bump up the comps. Getting a larger sum for the HELOC or Cash out Refi.

Any thoughts are much appreciated!

Hey Marc!

Lots to unpack here but I'll do my best to keep it light and brief. Sounds like you have a land lording friend in the industry or property manager. I'd refer back to them to see what a good approach is to bringing up this convo since your market tends to be hyper localized and what works here in CO may not be an appropriate way to bring up a rent increase/ month-to-month lease agreement in WA.

Also, here in CO, month-to-month typically comes with a much higher rent anyhow. Not sure what its like there in WA but great question to ask your PM friend. I bet the tenets want a longer lease to avoid the higher monthly rent increase and if they wanted to stay long term this may just be another way for them to be sticking with their plan.

Lastly, as long as you have a safe reserve for vacancy bringing up a rent increase shouldn't scare ya or be a hard topic. They know just like everyone else, inflation rose, rents rose, everything is more expensive. They are due for an increase and they're pry expecting one. If they aren't and they leave. You fix the home and get it ready for a new fam that'll pay a higher rent! 

That is one of the greatest things about real estate. The rents increase but the fixed expenses rarely go up. More cashflow! :-)

 Thanks Steve for your response! 

 Wow! Well thank you Sanat for the information! I'd love to hear more and dive in deeper with this as well as hear more about your experiences! 

I'll reach out!

Okay... I've been seeing a LOT of ads on my feed about opening a LLC and getting a business line of credit up to $250k!!!

I'm curious, has anyone done this and if so how'd it workout for your real estate investments?

TIA!

Investment Info:

Single-family residence buy & hold investment in Johnstown.

Purchase price: $362,000
Cash invested: $30,604

This was my first rental investment property. I used a house hacking technique, learned the term from Bigger Pockets, and lived in the property to satisfy the loan requirements before renting out the property. I put down 5% and with the other mortgage payments added to the total. I spent less than a 20% down payment as an investor. :-D

I purchased this house for many reasons but the biggest one...

I am getting a 52% COC return and am excited to use the proceeds to fuel my other investments!!

 Filled out the google form :-) I'd be happy to share some wins and l's L have with one of my current rentals. 

Had as a long term and the tenants trashed the place. Fixed it up for a mid term rental and now generating a 52% COC return.. Gonna get all my money outta the deal in 5ish years... Pretty happy with the overall experience!

~$30 down payment and closing costs

~ $16 profit/year

~Capex story to boot :-)

Hello my fellow investors. I currently have a mid term rentals for some temporarily displaced home owners in CO. There lease will be coming due in a few short months and once their home is rebuilt I'll have an empty home again. Little more context and background for my question to make the most sense. The unit use to be a long term rental and the tenants home had burned down in a fire. They moved in and brought all their remaining items and what the insurance company was paying to replace. Once they move out I'll need to furnish a 4 br 2.5 ba to continue on a midterm rental platform or switch back to a long term and have lower cash flow.

My question is, if you were in this situation what would you most likely do?

1) Use the existing cash flow to have as a large emergency fund and transition back to a long term rental (~$500/m cash flow= $6k/yr profit)

2) Furnish the unit with the ~$15k-$20k for a short term or mid term rental that would be a 4br 2.5ba (Mid term rentals typically seem to like smaller units in this area and the AirDNA shows I'd barley cash clow higher than the roughly $6,000 I'd bring in with the long term rental ~8k/yr).

3) Sell the unit and 1031 into something bigger. I have roughly $80k-$100K in equity and would like to scale into another market but because CO is such an appreciation state I'd rather not sell a potential equity building machine before really allowing the equity build up to happen.

4) Lastly, I am thinking of changing my mortgage into a Heloc and being able to utilize the equity that way. I'd have roughly a $40k dollar line to use for other acquisitions, etc. The downside would be releasing a record low interest rate and fixed financing that is easily paid off over the life of the loan.

Any additional options would be welcomed as well and thoughts are greatly appreciated!!! Also, should you need more context feel free to ask away in the comments below!

TIA!

It is a multifamily property located in Omaha Two buildings consisting of 21 rentable units.