All Forum Posts by: Axel Meierhoefer

@Justin Phillips Ahh, cool. I was only aware of residence and vacation. Thanks for sharing

@Tim Lounibos Got it. Depending on who you decide to get financing from, you don't necessarily need to wait for seasoning if you buy a fully renovated property for cash and then cash-out refi it.

The ARV idea is always based on the fact that you can renovate for a low amount and get more than you invested in the reno when the finished property is appraised.

I am always wary (call me chicken) and rather buy a fully renovated property from a turnkey provider, so I am not taking that risk. Admittedly, I also don't have the benefit of a significant spread between purchase pre-reno, reno, and then refi. I guess I watched too many HGTV shows in the past and saw too many cases where the reno never came in at the estimated cost.

There are many approaches that can be successful to build a cash flow portfolio so your wife can retire in 2027. OOS TK is just one option that reduces risk but also offers a little less opportunity. 

@Sarah West No it does not. You can find a lender who specializes in All in One and finance with them. The only I am aware of is that you normally can only have 1 All-in-One. That's why a lot of people use it for their personal residence.

@Daniel Burrows The idea to use a HELOC for a cash purchase makes sense to avoid payments in principle. IN a HELOC you are allowed to only pay interest, so you cost would be low and you can make a cash offer.

I am a turnkey investor, so in my case I am buying from turnkey providers, which is basically like "for sale by owner". You don't have a  realtor in the middle that costs money.

The market right now is very hot for great turnkey providers and their properties. Therefore if you can buy cash and have a contract in place based on an inspection DNA appraisal, then calmly work everything to closing and put a mortgage afterwards, you have a clear advantage compared to anybody who first has to get financing in place before they can really buy. Naturally, TK's prefer cash buyers.

In your case, you could buy, get it all done where the TK also puts the tenant in your property and manages it for you and as soon as that's done typically about 6 weeks after closing, you put a mortgage on the property and have the cashback for the next purchase.

I always suggest looking at the performance of the properties you consider. If you can find properties that perform at 1% and you don't need to manage them, I personally think that preferable to having to renovate it and manage it myself. 

I don't know about your experience but I admit for my own case that I am not a master "property finder", not a "master-renovator" or a "master-flipper", nor a master "property manager". The turnkey providers I work with have mastered all of that. That's why I focus on performance and not so much on trying to replicate what they already do.

Maybe something to consider

@Tim Lounibos As others have indicated, it's really important to know the "WHY" of your investments. I am investing in OOS SFH TK with the clear goal of generating enough cash flow to reach what I call my "Time Freedom Point" where I no longer have to exchange time for money (or have a job)

I love helping people and mentor them but that is not currently making enough money, so I keep working and investing. With that in mind, the changes in prices for houses would not matter much as long as they perform and generate the cash flow you are looking for. I aim for the 1% rule.

Your point about seasoning is probably a matter of lender and negotiation. If you invest for cash flow you would keep the property and putting a mortgage on a property you intend to keep should not require you to wait.

I am pretty biased towards turnkey investing because I like the fact that the TK carries the risk of the renovation and when they offer the property to me it's basically a "sale by owner" and I can verify the value (together with the lender) by getting an appraisal and an inspection before closing.

If you look for appreciation, the state of the market might play a role. If you hold long term and especially want to generate cash flow, you maybe have heard the following answer to when the best time to invest actually is?

"The best time was 20 years ago. The second best time is today"

@Jeromy Jordan As others said, if I were somehow determined to make this happen following David Geene's book, I would do a parallel approach. Honestly I think a lot of the things that have already been said, and especially what @Greg H. pointed out, is also my experience.

My solution was to invest with turnkey providers out of state. I know that BP is not fond of that approach but the results are what counts for me. My criteria are very strict and follow @Chris Clothier book with some personal additions.

That way I have a small group of qualified TK's and I found that I am working with trustworthy experts on all aspects: contracting work, maintenance, PM, sales, title, permitting, finding deals, etc. In addition, I have found lately that each of the "traits" you need to do BRRR long distance where you can't really be there yourself turn out to cost as much if not more than TK.

I think of it this way: You try to create a team of people who are available to follow your guidance from far away in a hot market where good experts are in super-high demand, and they're supposed to create great quality for a lesser price than local experts already working as a team in a turnkey company can. It's probably not impossible but I believe it very unlikely to work out. Why go through the pain when you can get it all done without the hassle. That's what I do working with TK providers in 3 states.

@Spencer J.Thanks for sharing. You probably saw in the PM response.

@Carlos Ptriawan Very astute points. I agree. The bigger economic picture needs to be taken into consideration and sadly not enough people do that. My expectation of rising inflation stems from that unrestricted expansion of the fiat currency and the associated increases in debt.

We can call ourselves lucky that the world still seems to respect the Dollar as a reserve currency. When that event with zero bond rates occurs there is a real threat that this trust will evaporate rather quickly and constructs like IMF SDR probably combined with a dominant crypto might replace it. That would have devastating effects for all people not invested in real assets.

@Spencer J. Just curious, did yuo "renovate prop #1 and prop #2, did someone else or where they just bought as is and rented?

I am asking because this thread is mainly about turnkey investing out of state, and you are totally right, it mainly depends on the TK provider and how well they work to have a nice passive deal - or the kind of deals you describe.

I hope you use the experience as lessons learned and keep your interest in REI. It's a great field and generates wealth if done right. If you like to talk, please PM

@Joseph Helms Ahh, great. That clarifies a lot. A TK provider is a company offering turnkey properties out of state. In my definition that find a property in need of renovation, renovate it, put it up for sale to you or me, and then manage it after the sale.

With the info you provided I would buy 2 properties of about $100K with about $1000/month of rental income.

This will provide you with approximately $500/month of positive cash flow you can use to pay your HELOC.

If you do not use any of your own money you would have paid back the HELOC in about 7 years.

I recommend using regular mortgages instead of HELOCS for investment properties because the rules are different, HELOCS will be harder to get and there are not really a lot of benefits I can see. On the other hand all the advantages of regular mortgages apply. Keep in mind that the tenants pay the mortgages so you are not losing anything.

If we had really high interest rates, trying to construct a HELOC deal for investing might make sense and then only pay interest and hope for equity gains over the years. Since our interest rates are so extremely low right now, I don't see why you would not want to let the tenants pay both interest and principal, and in addition, pay down/back the HELOC on your residence.

There is an old saying stating that there are "1000 roads to Rom". Using a HELOC on your primary and regular mortgages paid by tenants in your investments is one of those roads.