All Forum Posts by: Geary Crawford

@John Coberly

I think that you are spot on with working your tail off now and then experiencing the world when you put yourself in that position. It reminds me of the saying "do what others won't now, so you can do what others can't later." That one especially helps me keep going.

No problem at all on answering your question. I have benefitted somewhat from hard work and somewhat through a little luck. I have an engineering degree, and when I graduated from college in 2012 I was hired on in the petroleum industry. This is the lucky part as the petroleum industry was booming when I started making it easy to enter. So, that has put me in a position where I am able to afford to an accelerated payment plan that I have laid out for myself. I am fairly frugal as well, and housing prices are relatively cheap in Texas which is also somewhat being lucky. I hope this is not coming across as bragging or anything like that. That is definitely not my intention, and honestly, I wish that I had started looking at this stuff back when I was your age. I think you are on a great path having been able to save up essentially $20,000 already. It is even better that you are looking at investing the $15,000 and have already invested the other $5,000. I feel a lot of people in our age group tend to spend every dollar they make on status items rather than focusing on building wealth.

In terms of considering buying yourself a house or totally investing it, I would say it is probably smarter to just invest the whole amount and then compound it like you said. It really depends on what you want to do. I am kind of facing the same dilemma as you and am unsure whether to take my own advice ironically. I am wondering if I should cut back my payments on my house and use that money to invest or stick with my original plan to pay it off quickly. On one hand, paying it off quickly is much safer and definite route, but the other can possibly add a lot more value. I am also thinking about continuing the payment plan and borrowing money from family and/or friends if possible for a down payment. I have been reading a lot about the BRRR method while using a hard money loan. I'm not sure if you have looked at that as well, but it seems like a really good way to me to use the money you have now to essentially utilize, get back, re-utilize, get back, on and on. I just started looking at this website probably a week or so ago, so my knowledge is very low, but this website is such a great resource for learning. As Michael said, education is the biggest obstacle to getting started. I will have to take a look at Jay P Decima's books as well.

@John Coberly

Hi John,

I am a novice, but I was reading through your post and found it interesting. I am 26, and I actually want to do the same thing as you. It's cool to think that someone else has the same idea on sailing the world. Most people look at me funny when I tell them that I want to do that.

Anyhow, I bought a house last year for myself, but my goal is to have it paid off before I am 30. After reading through some information on this website, I am kind of kicking myself for not looking at buying a duplex/triplex/fourplex though. I don't know if you have considered this option at all, but it seems like it could be a good fit for you. You could move into one of the units and rent out the others. It gives you a chance to possibly have some cash flow or at least a much smaller mortgage payment, and you get to move out on your own. This kind of gives you the best of both worlds. Then, whenever you move out, you can then rent the side you were living in as well. It's just something that I have thought about, so I thought I would share it with you.

@Curt Davis

Thank you for the reply Curt. That makes sense. Just being curious, what else would the lender possibly refinance based upon? 

That's cool that you have used this strategy on all of your rental homes. It seems like a very efficient way to utilize your cash as you can keep using the same money over and over again to scale more quickly.

Being that you typically need to use this method on distressed properties, do you have a general contractor that walks through the house initially with you and gives you a repair estimate or do you have a good idea from experience or how does that work?

Thanks again,

Geary

Hello,

I am new on BP, but I have already learned a lot just from reading different things over the past couple of days. This website is a wealth of knowledge, and I really appreciate all of you who are willing to help out those of us that are new and considering getting into real estate investing.

One thing that I have read that is particularly interesting to me is the BRRR method. From what I have been reading, after a hard money loan is granted (seems to be maybe around 40-65% of the ARV for a new investor - I do understand that this is very variable based on different HML lenders), the investor then uses the HML along with the additional cash that they provide in order to rehab the property and then rent it. Then, it seems typically that after a seasoning period (6-12 months typically from what I have read), the investor can then refinance with a typical 30 yr fixed rate mortgage from a traditional lender at typically around 75% of the new appraised value (hopefully more than the HML that was borrowed). This is then used to pay off the HML and possibly recuperate some or all of the investor's cash that was used. Please correct me if I am not understanding this process correctly or my numbers are a ways off for a new investor with no prior experience.

I did have a couple of questions on the refinancing process.

1) Is there still a down payment typically required by the traditional loan lender for 20% of the loan amount? I am thinking that there is not so long as the HML amount is not greater than 75% of the new appraised property value. For example, say a property was purchased for $50,000 and needed $10,000 worth of renovations and has an ARV of $100,000. The HML lender is willing to loan you only $40,000 because you are new. You take them up on this and supply the remaining $20,000 to get the property rehabbed completely and then rented. After 6 months of paying interest and points to the HML lender, you refinance with the traditional lender. The new appraised value is indeed $100,000. Will they lend you $75,000 (75% of value), $55,000 (75% of value minus a 20% downpayment on the $100,000 value), $60,000 (75% of value minus a 20% downpayment on the $75,000 loan), or just the $40,000 that you owe to the HML lender? From what I have read, it seems like they will loan you the $75,000.

2) Do the traditional lenders give better rates if the property is already rented and generating income or is it purely based on the value of the property.

Sorry for being long-winded. This is very interesting to me, and I just want to make sure that I am understanding it correctly.

Thank you in advance,

Geary