All Forum Posts by: Cheryl Packham

Thank you Kyle!  I didn't realize that!  

Corey,

As @Jeff B. mentioned their is a high potential for asbestos contamination, however, if you have a newer property post 1978 (When asbestos was banned for this use) then their is little concern.  If before, then you should do your own research or call in a professional to test for asbestos.  If this is a commercial/rental property then you should definitely hire a professional to test for asbestos.  

If determined asbestos free I would use a steamer to steam the popcorn (if it hasn't been painted) and then scrap with a drywall knife.  This system works best with two people, one to steam and the other to scrape.  We did about 800 sq.ft. in a little under two hours including cleanup.  Cover everything you can with easily removable coverings and then just gather up mess and throw away.  You should be able to paint right away but you may want to consider priming first.  

Welcome!  I am originally from Green River.  Rock Springs and Green River are untapped markets.  I think you could do very well there.  They are boom bust (RS more than GR) so know your trends and know your deals.  If I can be of any help, let me know!  

Hi @Nicholas, I know this was posted a few months ago and I wanted to chime in as well because it was something I fought with for a while. I had the same thought process in regards to taxes and interest and really what I want to point out here is what people are alluding to here are "opportunity costs" and "time value of money". Also negative cash flow will hurt the DTI ratio more than having longer term debt.

First, I will say that I understand your thought process completely that paying interest to save on taxes is counter productive, and you are correct.  

Next, the most important thing to factor in a deal is what is the rate of return on the money you are putting in out of your own pocket.  Real estate is unique that lending is so readily available to purchase this type of investment, however, leveraging is also a strategy available in the stock market as well.  (I will not get into that here however).  

So, to simplify, If you take $100 and invest it at 10% return, you will get $10 back each year.  But say you can take that same $100 and buy $500 worth of investments by putting $20 towards each investment and someone else pays the other $80.  You have to pay that other person 5% for their money to use it.  Now, you have $500 worth of investments that still pay 10% return each.  So you get $50 back but half of that goes to the other person so you get $25 for your return on your initial $100 investment.  While you are paying someone else interest for the right to use their money you have increased your return on investment from 10% to 25%.  So you need to look at your opportunity cost for buying that first investment in whole or using that same money to buy several investments using leverage.  You would get $10 on wholly owned investment and $25 on your leverage investments.  So your opportunity cost of paying for the first investment rather than leveraging is $15.  

Now, time value of money.  As inflation increases our money becomes worth less.  Compounding interest makes a $1 today worth more than $2 next year.  So now that you have that extra return on your leveraged investment, you can reinvest it thus compounding the interest yet again.  

As with any investment you must determine your risk tolerance based on your situation and determine what amount of risk and leverage is reasonable to you.  

Another reason for using longer term loans with smaller payments to ensure a positive cash flow is to actually hep your DTI. When you can show full debt and expense coverage of your investment properties they will actually take that into account when looking at future lending scenarios. If you have a shorter term loan with higher payments it will increase your debt to income ratio regardless of the years to maturity.

I do not have an opinion on which one is better, I will tell you that I have chose to leverage within reason and to be very careful not to over leverage.  

I hope that helps,

Cheryl

Hello everyone,

I am looking into a property that has 13 units total and due to bad management and deferred repairs and maintenance the units are cash flowing poorly. Based on the information sent over by the listing agent, the owner is losing about $37,000 per year in cash flow. The NOI is sitting at around $16,000. The asking price. . . a whopping $608,000. I know my market and I know with some repairs and proper management I could have a NOI of about $68,000. However, with their current situation and an 8% cap rate, I have it valued at $127,000.

I have never applied for a commercial loan before and I talk to a lender tomorrow.  I have done plenty in the residential mortgage arena but I am very new to the commercial side.  I am trying to learn and understand how to determine the best way to approach this with a lender.  I feel like I need to understand what my lending options are and get a pre-qualification prior to making an offer.  

What should I know before sitting down with a lender?  What kind of questions will they ask?  Are their any restrictions on where the down payment should come from?  How could I present my analysis to get them to feel comfortable with my abilities even though this would be my first commercial deal?

Any advise would be greatly appreciated.

Thanks all,

Cheryl

I bought a 2014 Honda Civic this year new from the lot for $16,000.  It wasn't loaded and it was white but it came standard with blue tooth and back up camera. You can achieve the best of both worlds it just may take some shopping around and finding those cars on the lot that the dealers are desperate to be rid of.  

Also I agree with others, if your used car loan interest rate would be 10-12% interest, you will not qualify for the low or no interest rates on a new car.  That is just how they get you in the door.  Then you end up with a high interest loan on a brand new car and are in worse shape then you were before.  

This is the wrong forum to be discussing this, there is a personal finance forum that would be much more appropriate.  

It greatly depends on what your strategy is.  Can you use that 800 you didn't use to pay your credit card to make more interest than you are paying? I am assuming here that this question is not as simple as it appears. 

However in case that is a bad assumption and you truly are asking if it is better to pay off a credit card balance each month or pay it over 5 months I will provide that explanation. Paying $200 per month for 5 months on an interest collecting credit card will not actually result in a paid in full balance. A 1000 balance on a credit card with (for example purposes) 13% interest APR, paying 200 per month will result in an additional 33.80 extra to be paid in interest over that 5 month period. This means that if you pay $200 per month for five months you will still have $33.80 to pay in month six. For a total amount paid of $1033.80.

In my experience, if someone no longer wants to be in your property, it is best to be as cordial and accommodating as possible.  Once you put the grind on someone they will start to lose respect for you and your property.  You know that they are no longer going to be income producing tenants and they blindsided you which means that they already don't respect you.  Allow them to break the lease and start to advertise for new tenants immediately.  A month vacancy is better than repairing a property from a angry tenant who didn't show your property any respect when they were moving out.  While vacancies can hurt, they hurt a lot less than a destructive tenant.  

if DTI is the issue then use the proceeds from the cash out refinance to pay off the debt used for repairs and any others affecting your DTI. I just did this if you have questions.

Here is what I would do.  First, call your credit card companies and ask them to lower your interest rate and increase your credit limit.  Likely the first person you will talk to will tell you that they can't do that.  Ask them to speak to a manager or a customer retention specialist.  This will give you a chance to try out some negotiating skills and will give you some confidence in dealing with people.    

Next, CUT UP YOUR CREDIT CARDS and stop using them for any consumer purchases.  (At some point in your future you may use them for leverage on income producing deals).  If your car interest rate is less than 3% then don't pay it off.  You can get better returns on your money.  Your credit card debt should be paid off immediately but don't close your accounts.  Call every 6 months or so and ask to lower interest rate and increase the limit.  Trust me this will come in handy in the future by both increasing your credit score and giving you an opportunity for low interest leverage on a renovation.  

Please do not go out and start spending a bunch of money on LLCs, S-Corps, marketing materials etc. Start with finding a deal. Drive around, look at your assessors site, post on craigslist. Do whatever you can. If you find one you can manage go to a local REI and find someone who can. Build your knowledge on real estate and repair costs any way you can.

Stock pile as much cash as you can and always save at least 3-6 months in expenses so you never have to use those credit cards again.  

I hope this helps.