All Forum Posts by: Justin Mathews

@John Mckee I could also get a non owner occupied HELOC. I guess this would be better because I wouldn't be paying interest on the amount that I have not withdrawn yet? Are there other advantages? My thought is that the rate won't be locked in for 5 years so it could be more dangerous.

@John Mckee it should lease for around $8 /sq ft NNN so noi of $88000 annually. Not sure how to value it with that in mind.

I have an urgent decision that I could use help on... My wife and I bought an 11,000 ft² Warehouse space and have white boxed it. It appraises for $800,000 and as of today we have about $550,000 into it with renovations and purchase cost. Unfortunately, we just found out that we're going to need a brand new roof for $105,000 plus an additional cost of $65,000 in other construction costs for a grand total of $175,000 more than our original budget.

Our current loan is almost maxed out and we don't have enough money to complete the project using just cash we have saved personally. We need an additional $175,000 to bring it to market ready ASAP. This brings me to the decision...

We own a rental house that is worth $300,000 and that is completely paid off. That house brings in $2,100 a month cash flow today. In order to complete the warehouse, the bank is suggesting that I take out a loan at 5.95% against the house in order to get the cash we need. That works out to about a 1400-1700 loan payment each month on the house.

My question is should I go ahead and take out the full 80% that I can possibly take out of the house equity? This would leave me approximately $65,000 cash to invest in another property after the warehouses leased. Alternatively, I could just take out the $175,000 that I need. If I only take out the 175k I'm left with the lower mortgage amount and more cash flow out of the house each month, but I can't buy another property.

I am thinking it doesn't make sense to leave the cash in the house and not deploy it especially since I'm going to incur closing and title cost either way. With the additional 175,000 on the warehouse we will be at a total of about $725,000 debt and it is worth at least $800,000 and it will be 100% updated and ready to lease. I'm looking to hold because it's in a developing area and the long-term equity play is significant.

So again, do I take out the $175,000 or do I max out the equity withdrawal at $240,000? Is there a better way to get the cash that I need? This is certainly the fastest and cheapest way I can think of vs trying to get another commercial appraisal on the warehouse. If I paid for another commercial appraisal on the warehouse the appraised value will likely have gone up but probably not enough to borrow another $175 against it anyway.

I really appreciate your thoughts! I need to make a decision Monday.

Justin

Thank you all for the thoughts and advice. I plan to keep this one for myself and sell the stock. This deal is in the KC Missouri region - three small brick duplexes, 2 bedroom shotgun style setup with a small kitchen and backyard. Low-income older neighborhood but many owners working on their homes block by block. 

@Taylor L. I think this is what I'm hoping to find out. Has anybody done a similar deal and what terms do you give an investor who's just bringing you the down payment? I guess if they're bringing 25% down and I'm bringing the deal I could give them 25% of the cash flow. What are structures that you've seen work?

So here is the scenario: I have a deal under contract for 3 duplexes in a row that are turnkey and already flipped. They will cashflow $4900 a month and net around $1800 a month after all expenses, capx, etc. It will require $70,000 down to close on a 15 year 4.1% loan fixed. I like the debt structure and timeframe for the loan. I like the cashflow as it will give me about a 29% cash on cash return in the first year. This is way better than the stock market. The 6 units are already rented with fresh 1 year leases as well that I have vetted and like.

My question is whether I should reallocate my limited resources by selling some positions in the market to fund the 70k or seek a loan partner for the down stroke? 

I do not have cash to burn so this is a significant reallocation decision. There is enough cashflow to share with a partner but why do that when I don't have to this time? Next time I will need to partner to get the downstroke or just wait and save until I have it to buy another property.

Advice? Go! ...

@Tiffanysmith could you post a link to the meet up or FB group? 

This is great! I'm in KC but about to buy my first BRRR in St Joseph, MO. I'm going to join the FB group but would like to join the meet ups in person too if they get going again. Thank you!

Justin

great post! I'm preparing to buy in St. Joe too! I live in KC but have family there. What neighborhood did you buy in? I'm looking off of 19th st on museum hill. I'd love to connect and learn together if you are interested. DM me. 

@James Storey thank you for the response