All Forum Posts by: Gregory Dunton

@Daniel Slayton - did you end up moving forward?

@Leonard Pearsonhttp://jaxreia.org/ as one close by.

Other possible options that come to mind:

1) Seller finance it.  Does she need the whole sales price for her new loan?  Seller financing part of it would reduce your funding needs to a more manageable number.  If she needs help covering monthly expenses, you could always work out a deal to help her cover those (either out of your pocket or add it to the repair budget).

2) Partner with someone.  Either someone with the money, or another flipper that could help complete this deal.  Yes you give up some of the upside, but it also helps you complete the deal.

3) If all else fails and you can't find the financing, wholesale it.  Assuming your numbers are right, there is a huge spread on this.  Not familiar with your area, but using the 70% rule, you could market it for $185K and make over $50K. 

There are probably 1,000 other options, which is why RE is so interesting!

Best of luck and let us know how it turns out!

@Joe Au

That looks like it is working right to me.

I am impressed this conversation is still going.  I don't know if the main participants in this discussion deserve medals or need better hobbies...

@Joe Threats That tax amount would imply an appraised value of ~$30K.  Not saying that its wrong, but definitely warrants further investigation since that's really low and taxes in Texas can take a bite out of cashflow.

Note: I don't own any investment property in Houston, but I owned my primary residence while living there until recently. 

$776 in annual tax seems low for Houston.  Is that inclusive of homestead and other exemptions?  As an investor you won't get those tax breaks.  Houston typically has around a 2.5% tax rate so I would go to HCAD and check that

@David Dachtera

I did the amortization spreadsheet exercise, and completely agree that by doing that you save lots in interest and payments compared to the original amortization schedule.   

But in reality those payment of principal and interest to the HELOC could rather be put to extra principal payment to the mortgage, and that is what many of the others are arguing.

In short:

Compared to the original amortization it saves a lot in interest and payments.

Compared to taking the HELOC payments and instead making extra principal payments - there is marginal savings that comes from the timing of interest.

I personally think that the right comparison is against the later example, since the cash flows are similar in each period.

Disclaimer:  I haven't watched the video or actually used this strategy.  

I modeled this out, and it does look like there a marginal benefit to the strategy compared to just paying extra principal each month. It seems to come down to the value of lowering the average daily balance of the HELOC with the timing of income and expenses.

Basically assuming you dump your paycheck (paid monthly) onto the HELOC at the beginning of the month, you have reduced the total principal balance by a significant amount. As you pay expenses for the month, the HELOC balance gradually increases until you effectively have the same principal balance on this HELOC combined with the Mortgage as you would have with the mortgage with an accelerated payment.

The picture attached shows the comparison and how the HELOC method averages out a lower average debt level resulting in lower interest.

That said, the total savings and ability to pay off the mortgage faster is minor compared to potential HELOC fees and risks, so I don't see it being worth it.

I am also new to this, and would love for a critique to show me where this might be wrong.

I would share the excel model, but I am not sure how to do that.

Thanks!

@Kyle Adam  I just sent you a PM.  I have similar interests and since I am just getting started as well, I would be interested in discussing ideas.

I just signed up for the event that @Stephen Quesinberry mentioned, so if anyone else plans to attend let me know, I would enjoy meeting more people!

 Thanks Nick!