All Forum Posts by: Jody Sperling

This sounds a bit to me like an ethical question, but I'm going to leave the ethics aside and share what could be done, hypothetically, if you were to move and rent your current primary.

1) Nothing would have to change in the terms of your current primary loan, but you would have to accept that the current lender would send mail to that address for the first year. A slight inconvenience, but workable.

2) You would have to work with a second bank to obtain a loan for your new home, and accept a commercial loan, putting 20%-25% downpayment instead of the lower downpayment primary loans qualify for.

or) You could explore owner-financing or private money.

3) You would have to double up on insurance to be safe for the first year, because you'd want a second policy as a landlord since a homeowners would not cover renters. This would be expensive, and if the move is profitable, you won't mind the extra expense, especially in the long run.

Congrats on the first! So few people actually ever buy their first investment property. Once you have, there's no going back.

You don't have a set time for a refinance. My recent off-market acquisition refinanced in less than 3 months, but typically you wait 6 months to let the investment season. I chose to get cash faster by using a commercial loan with my bank and I'm paying 1.5% higher rates for that convenience. I've never been one to complain about rates though, so it suited my needs.

If you want a cash out refinance faster, you can talk to your bank's commercial lending side, otherwise, hold the purchase agreement and wait 6 months. You'll likely get favorable rates if you wait. Best of luck, and congrats again!

Probably the best thing you could have done was post the exact details of the deal here. There are a ton of investors who would finance a deal if it was truly a no-brainer. Experience tells me, as soon as I read phrases like "epic deal" that the property in question is one to stay away from.

I work in insurance, and when someone calls me and says, "Hey, Jody, I've got a really great risk I want to talk to you about." I immediately know it's a dumpster fire. Great deals speak for themselves. Share the details and let the community decide.

Interest rates are deceiving. Don't be fooled. 2.85% amortized on a 15yr. loan. For the first 7.5yrs of the loan you're paying the equivalent of 50% interest. You've already benefitted the bank by paying on amortized schedule for the past 4 years when real interest on the loan is at its absolute highest.

Instead of refinancing, apply for a HELOC using the equity you already have in the house. Even if you pay 6% simple interest, you'll save up to 44% on interest payments with any investment you purchase. Best of luck however you choose.

If you reply with your questions I'll give you my best input.

The kind of loan you have will greatly impact what you can purchase. Private money is flexible and would allow more options, but it you have bank financing, try to find the best deal on the market in the best neighborhoods.

A lot of first-time buyers are more concerned with price and pick up headache properties just to jump in the game. While even that strategy usually works in a buyer's favor, it causes unnecessary inconveniences and can slow wealth creation.

Holding great properties forever is a powerful wealth builder.

If your life situation will permit, house hack. Living in and renting a property eliminates one of your biggest sources of liability debt, turning it into an asset. House hacking (living with your renter, whether the property is a house with rent-by-room, or a duplex/tri-/or quadplex) will speed your wealth creation by years.

Best of luck to you!

Typically the types of homes that qualify for a flip or BRRRR don't qualify for traditional bank financing. Private money tends to be the next best option, as you can often get it cheaper than hard money. On my recent BRRRR, I arranged with a friend to lend me 25k at 14%. The cost of the loan was baked into the rehab estimation.

Perhaps the other half of your joint venture will be your financing. That always works well, but if it's a collaboration of skills you may need to pull hard money. Where I'm at 18% is a good deal, but you may be able to find a better rate than that. The most important thing is to factor the cost of loans into your rehab.

Can you afford interest only payments? Do you have multiple ways to exit if the rehab gets off track? Do you know where you'll take the asset to refinance if you want to BRRRR, and do you have an existing relationship with that institution? If you're going to flip, have you considered the 6% commission in your rehab estimates?

Once you've tackled all these questions and details, you'll have a strong foundation for completing a successful flip or BRRRR from a financial perspective. Best of luck!

Typically a BRRRR works when you can purchase a property at a percentage of its ARV (After Repair Value), then rehab it to full value, rent it, and refinance your money out of the property. These types of property rarely, if ever, qualify for traditional financing. Banks don't want to lend on a home that is not immediately habitable.

Sometimes you can get a 403k or similar rehab loan, but then you've already taken more from the bank than the appraised value, so there's no room to refinance. Cash option is going to be the best, and if the property doesn't make sense as a cash purchase, it may not be an ideal candidate for BRRRR.

For starters, your question isn't beginner level, so don't worry, though I applaud your attitude to ask regardless. It can be tough to show you don't know something you potentially should.

I grew up in Denver and lived with a guy who rented two rooms in his house. Once, in casual conversation, I learned that he was exactly covering the mortgage between the other renter and me. Knowing that even in the early 2000's Denver was one of the hottest markets, I can say that most markets should work for "free" living if you can rent all but your bedroom.

That said, location is a huge piece of the puzzle, and there's no way the same landlord who rented to me could have covered his entire mortgage if his house had been in Boulder. D.C. Los Angeles, San Francisco, New York City would all be places where that arrangement would fail badly.

In Montpelier I would expect you could cover costs if you had multiple rent-by-room tenants, but even if you don't, you'll so drastically cut costs with just one renter that a house hack is still the most powerful investment strategy in real estate. Best of luck!

I'm probably either (A) old-fashioned, (B) short-sighted with money, or (C) too low-risk to answer this question with a genuine consideration of both perspectives. That said, each market may encourage different approaches based on its specific qualities. Not every market is as hot as Boise, and not every market is as cold as Louisiana.

What my approach has always been, and will likely continue to be is buy-and-hold. I'd rather find cheap houses, buy and rehab them, rent and refinance as much cash out as possible. Once I have a property with tenants, I have a property that cash flows.

For me, having a predictable flow of cash each month is among the best ways to feel safe while having a tenant pay down a loan is the best way to create passive wealth. What do you prefer?