All Forum Posts by: Jesse Waters

Cross Collateralization is pretty simple. Say you own a property valued at $100k and only owe $50k, you have $50k in equity. The lender allows you to have 75% LTV, so they allow you to pledge part of your equity as the down payment on a new property, as long as your total portfolio stays under the 75% LTV.

@Dustin Little

I have a rental on a VA loan, it was originally my first home, then we moved. I have refinanced it twice. The first was to get it from a 5/1 arm to a 30yr fixed. The second time was to drop 1% off the interest & save about $125/month in payments. Since it was a VA streamline they didn't require an appraisal, we are still upside down on the property so this saved our bacon on that property.

We were able to have all the closing cost rolled into the new loan, so nothing out of pocket.  I would get the facts from your lender and see what it will cost & how the numbers would look if you were to re-fi the property.

Also, it never hurts to protest your tax valuation to see if you can find some savings.

So: Call your bank, see what your numbers would look like with a re-fi.

Shop for insurance

Protest your taxes

Look for a new PM/evaluate your rents vs market rent.

If you think you can bring the property into the positive range, after all that is done, then go for the re-fi.

I would avoid holding anything for negative cash flow unless you have tons of money, you can't afford to hold too many negative deals for too long before you end up broke.

Just my two cents worth.  

@Dustin S.I have talked with two lenders about blanket loans, and the both seemed fairly reasonable.  The down sides that I saw were the higher appraisal cost, since they were considering this a commercial loan package.  The other thing, as you mentioned, was selling a property out from the package.  I have bought a property that was in a blanket loan type structure, closing was delayed because the lender and seller couldn't agree on how much should be given to the seller in cash and how much should go to pay down the note.

I have since drifted away from looking at the blanket loans to the cross-collateralized options and heloc's.  

Have you talked with you local banks & credit union's?  They may be more open to being a little more creative or offering better terms on a cash out re-fi on your existing portfolio, particularly if you are willing to move all of your business over to them.

I agree with @Hattie Dizmondon this one.  Even though the seller is motivated, doesn't sound like the rents will support the deal.  Especially with a bad tenant in place.  You aren't even at 1% on this deal, plus its a condo, and those can be a severe pain.

Best of luck.

Jesse

I just spoke with B2R financing, I think they were a podcast sponsor a few weeks back.  They seemed pretty open to creative ideas, including cross-collateralization to allow me to purchase my next property with relatively little out of pocket.

Have you considered a blanket loan to wrap all your properties under one loan?

I agree with @Chris Duzan taxes in Columbia/Richland can be painful.  I try to stay in Cayce/West Columbia or Lexington.  Anyplace that is unincorporated is better for taxes.  I have looked at too many deals in the Columbia area that would be good until I take a look at the taxes.

@Anya K.& @Kelly N.

Thanks for the info.  This property underwent a lot of renovations in the past few years.  All new Hardy Plank siding, new roof, new kitchens & baths & new windows.  The electrical is all newer as well, no knob & tube.

I think I am happy enough with the numbers to make an offer.  Just want to get it under $95k.

@Jeff S.@Brandon Hall

Thanks for the input guys. I have dug up some more solid numbers including both city & county taxes, better estimates on utilities etc. I have also looked at comps for the furnished rentals in the area. I am calling this one a comfortable 14% COC, even with over estimated expenses.

As far as the purchase price goes, $110k is just the list price.  I know the selling agent and my broker has sold properties for the owner in the past.  The owner is no longer in SC and has moved back to NY and is desperate to get out of all of her properties and is very willing to make a deal.  I am thinking we should be able to nab it for closer to $85k.  Or 18%, higher if I can get he seller to pay some closing cost.

Hey @James Namif a property produces $200/door cash flow per month, then yes, you would each take home $100/month if you use a 50/50 partnership.  My business partner and I have things on a 50/50 share at the moment because we have each put up the same amount of capital and if/when we sell we will each take 50% of the profits.

Before you consider partnering just to partner consider what your potential partner will bring to the table: Credit, cash, knowledge, experience, networks etc and compare that with what you are bringing to the table.

Some of the answers to your questions depend on how you intent to structure your partnership and what your goals are for this partnership.

Best of Luck

You might want to consider taking a private money lender on for a year or so then re-fi to a conventional loan.  Most of the conventional lenders that I use don't want to bother with a property under $50k, its not worth the paperwork they have to do.  If you re-fi after a year or two then you can get a loan based on the value of the property no the purchase price, you should then be able to pull some cash out to use for the down payment on your next property.

If you want to go with a bank for this property try one of the credit unions around town.  There are a bunch around Columbia, they may be more willing to do a lower value loan, particularly if you are talking about a $30k property with 30% down, that's along the lines of a $21k loan.  Most mortgage guys I know don't want to bother, but private money will be game, even if you use prosper or another P2P for a year then re-fi.