All Forum Posts by: James M.

@Jaysen Medhurst I'm assuming when you refer to ROI, you mean the total picture correct? So CoC return over time and then if I sell that gets figured into it, obvously divided over how many years I was holding and the money I inputted. Just wanted to make sure my knowledge of that term is right.

In San Antonio, its tough to even find a 1 percent rule deal, let alone a 10 percent CoC return and hell will freeze over if I found mid-teens in the wild. To be fair though, I have not networked, at all. So my goal for the next 6 months as I accrue cash is to network very hard and get to know all the wholesalers, etc. in my area. Mostly through BP and my local Real Estate Group.

@Jacob Villalobos Definitely hear you on the vacancy/capex/repair. Sorry if it wasn't clear but yes I always, always include it. Roughly around 17-20 percent of my return cash. I've only got experience with one rental, so I am currently a landlord for about 2.5 years now and its worked out for me thus far. But I may be lucky as well. Also hear you on the debt piece, my goal is to pay off anything I took out of the HELOC in less then 2 years, preferably 1.5 years. Is that sensible you feel? And if it is, would you basically still just not use it unless it was a fantastic deal? I'm trying to leverage the equity in my house because it "sits" there. I do realize the risk, but I have a large savings that shadows any HELOC spending I do. It does feel I'm trying to put lipstick on a pig sometimes, I'm just trying to see what I can do to accelerate, but do it in a careful manner and not be irresponsible.

Great point on the leveraged account @Account Closed forgot about the factor with the credit limit. If I had a 50k HELOC and pulled 30k for this deal, could impact credit in a good way. Thankfully I have excellent credit, but that doesn't stop an almost maxed out credit card from hitting it pretty hard.

Makes sense, I guess I didn't think about it in that sense. I really just need/want 20-30k. I assumed a line of credit was just there but it makes sense if I leverage the whole thing, it doesn't matter how much I take out it'll still be a bit over leveraged.

Never did a HELOC before so I will definitely just HELOC for 30k or so if its an option.

To be fair appreciation is a general guess  based on the trend. I also know the area decently well and I noticed its been going up in general. For better or worse there are a lot of flippers in the area and this house happens to be where my current rental is as well so I know the neihborhood, its about 3 blocks from my current rental as luck would have it.

Thanks @Account Closed

@Jaysen Medhurst I updated my original post, annoyingly it didn't format as I wanted to so I'll repeat it here. As you can see the numbers are a bit tight and definitely not worth it CoC return wise if I used my own money. I took your advice and put in PM and it squished my CoC from 8 percent to 4 percent, if it were my own money. I tend to try and hit at least 8 percent, perhaps that is too low or misguided for others as a CoC return, open to thoughts on that.

In any case, assuming half of this would be my HELOC and half my money, would that artificially increase my CoC return assuming I pay the HELOC back via the cash I'm receiving and then perhaps a year or so later refinance and pay it off? Or does it not work like that?

• 
  
  Purchase Price: 135k 
• FMV: 150k
• Rent - 1250-1300 
• P&I/Property/Insurance - 848 
• Vacancy/Repair/Capex - 7/5/5 percent - 221 a month
• Management - 10 percent - 130 
• Cash Flow (renting for 1300) - 100 with PM, 230 without
• Cashflow (renting for 1250) - 50 with PM, 180 without.
  
  

Thanks @Jaysen Medhurst fair point on the PM pieces. I try to be very conservative everywhere else, rent included so I shouldn't leave it out.

• The 150 cash flow is a good question and one I didn't consider. It is before. My intention was to put all money, not just free cash flow, towards it. In reality that may be about 400 from this rental per month. And I'd use the HELOC as a capex/repair account if it came up since I'd be using that money already to pay it off. I do have another rental so I played with the idea of using that rentals cash as well to pay it off faster. Goal would be to pay it off in less then 2 years over time if I wasn't doing a refinance-cash out (Which I have not done before so not sure if this is a full option).
• Family member is unlikely to be approved for two home loans at once so them doing an owners finance still makes it look like they have a loan with Bank 1, when they try to make another loan with Bank 2 it's unlikely their income will allow them to be approved, but this thought has crossed my mind. And to be fair, they have not looked into their second loan viability. And also to be fair, I also have no experience with owner financing so I only assume their original loan will still show up as owed since it would be "wrapped" around the owner financed one, yet still exist.
• I will definitely discuss this with my lender, first time using a HELOC and I'd rather be clear with all parties what I'm doing. Again I could make this work with my own capital, but the goal was to see if I could get more "bang for my buck" long term on equity I already own.
• I will reply here later on with the full layout of the analysis, I should have started with that. I'll update my top post here as soon as I can.

P.S. I am actually VERY interested in the Owner Financing bit, if their credit/income was better it'd probably be my first option. Any advice in what I should look into to make this happen? Any tips on how to go about this "wrapped" owner financing I'd assume they'd have to do since they still have a mortgage?

Hello BP!

I'm a small time investor (when do you get to be big time?) with just one rental property. I am looking to obtain two more rental properties this year!

I currently live in a house with about 100k Equity in it and 120k left to pay off. So LTV HELOC as I understand it, I could get a line of probably 80-90k.

I have an oppurtunity with a family member for a non-arms length deal. I could easily save up for the down payment, but I wanted to see if the following logic makes sense if I used a HELOC instead:

1. House sale is 135k, could likely go for 150k today, it will appreciate by 7 percent over the next year or two.
2. Lets assume a full 20 percent down payment from the HELOC (27k)
3. Cashflow is about 450 a month, not including vacancy/capex/repairs, in which case real cash flow is closer to 150 a month. I plan to PM myself as I do today for a very long time and then PM to another later. I'm not too concerned with calculating PM costs into it until later in life when its either paid off or refinanced at a lower payment.
4. All combined the leverage would be a conventional loan for 80 percent and a HELOC for the other 20, none of my direct cash.

With all that in mind, the following questions come to mind about whether this makes sense or not.

• Technically, if I'm using the HELOC completely or majority of the purchase, would that mean my CoC return is effectively much higher since its not my own money (directly, I know its my equity) as long as I don't make my own payments on the HELOC?
• Does it make sense to use the Cashflow from my first property, and my second property to pay down this HELOC as a strategy? I figure after a year I could see where its at and refinance-cash-out (I have not tried this yet) and pay off the remainder, or continue to pay it off. This does tie up that rental money but I'm okay with that.
• Or, should I just wait to see if appreciation happen and refinance-cash-out. And pay off the HELOC?

To ease tensions, I am in a very grateful situation to where I have no debt (besides my current residence and rental) and bring in 10k of free cash flow a month, so defaulting on a HELOC pull of 27k is unlikely. I could/might do 50/50 where i do 13.5k of HELOC and 13.5k of my own cash.

Sorry for the long post, but does my logic of HELOC pay off hold water in this situation?

Hello,

I'm a fairly new landlord and this tenant has family members that are master plumbers. That's their background, but her request is to basically replace our bathroom faucets for some newer ones with no charge to me. The current ones do have some build up and they are quite old (came with the house 1986). My main questions are, should I trust this? How should I document this outside just emailing to confirm? Any litigation issues here?

No cost to me sounds great, but whatever she installs may be hard to get out, or cause leaks. Should I ask for the license of her relative?

Agreed on all points, and yeah he's never going to hit those numbers after fees. Well, it was worth a shot. I guess I wasn't crazy after all. What a shame.

So, I have two friends that are looking to sell their home. Now, let me preface this by saying I am not looking to buy their home unless I meet their goals and my goals at the same time. Ultimately, its important for the personal relationship. Some may say you shouldn't mix friends/family with business, but this post isn't about that debate. Lets just have an exercise.

My problem statement: I cannot find a good way to make these two deals work for both MY goals and my friends goals at the same time, but perhaps I am not creative enough in the financing department.

MY GOAL: To obtain another buy and hold property. Preferably with 10% or higher and 200 CoC or higher.

MY FUNDS: 30k cash, 7500 added per month (not sure if this matters). And I have the ability to likely obtain a HELOC. Just adding these in case it comes up as something useful in this exercise.

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NO BUDGER: Friend 1's goal is to make 50k on his property after he sells it so he can move to Colorado with that money. He may consider 40k but he's shooting high and won't budge. Which is fair, as in this market its very hot and I could see it being possible.

Their Mortgage: 97k

House Value: 140k Average

Rent: 1200 Average

Taxes: 3,667

I'm not sure there is any way I can make this work. On face value, it doesn't even meet the one percent test. And, if I purchased it at the comparable price I'd be negative cash flow for sure. I've been racking my brain on how I could give him 40-50k cash, still take his mortgage off his hands, or at least the worry of paying the mortgage each month. And then rent it. I think this one is a lost cause.

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JUST WANTS OUT: Friend 2,my other friend has this rental which they charge only HALF the current rent. Yeah, I know. Anyway, he is looking to get rid of it, he just wants the debt gone. That's it. He doesn't want to pay it anymore or deal with it. However, he bought it as a flip which isn't always a bad thing, but usually isn't the best for ROI when you can do at least a light flip yourself... I digress. His ultimate goal is to just not have to deal with the property anymore.

Mortgage: 133k

House Value: 130k Average

Rent: 1100 Average

Taxes: 3,663

Again, fails the one percent rule if I were to just offer 130-140k, bad deal. I've been trying to figure out how I can get my friend out of his mortgage/payment/management of the property and use it as a buy and hold. And so far I'm just out of ideas.

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I think I may find that there is no way to make these properties work. The taxes don't help, but I wanted to make sure and exhaust my resources at hand. I'm still a novice I'd say, I've only been doing this for a year and only own one property that I rent. I've read a lot and listened a lot, but haven't thought of a way to finance this and make it profitable.

Thoughts? I think they both just might be a wash, unless Friend 2 wants to take a loss. Which I wouldn't want him to.

@Rick Pozos absolutely. This post isn't really encompassing all the background work I've done for the pre-screening process, the application process and so on. This is strictly for the eviction process. Yes, it is a vacant property, but I want to have a policy for every single event down to the letter so that I am ready and its not drama city. Evictions sound to me to be one of the more confusing areas so I'm getting that sorted now rather then on the fly. :)