All Forum Posts by: David Oldenburg

@Shaun Carl I do this every day!  You paid cash for the properties.  If you "cash-out", it is important to look at what you are doing with the cash. I frequently see people cash-out and earn a lower rate of return on the money than what they are paying in interest.  You didn't mention your plans for the money, so I am guessing you have a great investment opportunity. Remember, if the new loan is at say 5.25%, than that is the equivalent of you "earning" 5.25% on that money that is sitting in equity right now.  If you can't earn more than the 5.25% new payment, you would be better leaving the money in equity.

Ok, onto which loan program is best!  Basically, you are comparing 2 loans that are both 20-year amortization, so the best loan is the one that has the overall lowest "cost" when you add closing costs (fees) and total payments. The challenge here is that I am guessing both loans have the same "fees", so the only real difference is the "call option" and the "rate".  It's a no-brainer that the lower rate loan is the better deal. However, it comes with a "call option", which is really a form of an acceleration clause.  The lender is basically saying, "if you are paying us 5.25% and we have a better opportunity, we are going to call your loan due!"  

Here is my advice. The loan amount is small and the difference in payments between the 2 loans is only $63 per month. If you believe you are going to sell or payoff this loan in the first 5 years, you should take the lower rate and take your chance on the later year call option risk. If you are pretty sure you will keep this property more than 5-10 years, the "cost" of the insurance against a call option is an extra $63 per month x 120 months = $7,560.  

There is one other item that is important. What happens at the end of 10 years?  Is there an option to roll into a loan for the remaining 10 years, or do you have to find new financing, pay fees again and start over?  Just something to think about...Good Luck!

@Chris Vail Thank you!  Great to see someone right in my neighborhood :-)

@Jeff Jamieson Being a "newbie" is awesome, and Sacramento is a great place to start and do business :-) 

@Orion Walker @Zoran M. 

 Great to meet both of you!  I look forward to networking and getting to know you :-)

@J. Martin You are correct about there being a lot of money, chasing fewer deals. This has made it very hard for the "vanilla" flipper to make money.  I was in Anaheim last weekend at the Real Estate Investors Expo and had a great time. I spoke with a lot of private investors about this issue. The ones who are doing well are the ones who are carving out a niche.  However,  a "niche" could also be your marketing and networking, so that more deals and opportunities are coming your way.  There is something like $8 Billion dollars every month in cash deals in California, so there are more than enough opportunities :-) I look forward to getting to know you better here!

@Kyle J. 

 Thank you! 

@Elizabeth Colegrove 

 Thank you for the response!  Yes, I do listen to the podcasts. I get a lot of enjoyment from them, as I hosted a very similar radio show for almost 8 years in the Sacramento area. The forum and networking opportunities with a site like this, is priceless.  I too look forward to hearing your stories and learning about you :-)

@Jon Holdman I didn't see any "contact me" posts in this thread, but will take your advice for the future :-)

@Dan Brewer I am always open to talk to people :-)  I answer my cell phone, or call people back. 

@Dawn Anastasi 

I have done over 5,000 transactions! I do everything :-) I like wholesaling and flipping quite a bit, but I sometimes flip homes while the sellers are still in them. I do this when a seller needs repairs and helping them will increase the value of their home. I am talking about a seller who has no money to do the repairs on their own. I have Realtors and others in the industry who often call me with potential deals, usually off-market and not yet in MLS. I frequently partner with other investors when my money is loaned out and I get a good opportunity. I could tell a lot of stories, but I don't want to write a novel on the thread here :-)