All Forum Posts by: Josh Edelman

 @Josh Edelman That's awesome! In short I waited to file my tax returns. I made more money last year than the year before but I can't prove it until the returns are filed. My expectations are to file the returns, apply for a HELOC from a lender that will loan on a primary residence that receives rental income, and then use the remaining portion of my VA loan at some point later in the future. I have considered buying raw land with the HELOC or going in with a partner with either private money or equity stake to build new construction duplexes. But it all hinges on the HELOC. What lender did you use? Did your primary residence receive rental income while it was your primary? That has been the sticking point when finding lenders for me.

Looking into real estate I want to build up my portfolio however I know that interest rates are high and finding cash flow is even harder tp obtain. I'm planning to buy a property with a ADU to rent out to cover some or most of my mortgages . I'm in the inland empire and there are lot of opportunities here. I guess my question how would I analyze deal or which resource do you guys use to analyze your deal? Any other advice is welcomed too!

@Josh Edelman Don't use Navy Federal! I use them for personal and I used to use them for business but switched to Chase last year. I'm also military, but Chase continues to charge me fees on the business account. How did you get them to stop the fees?

What's up BiggerPockets! First post here. I have a question for you folks.

In 2020 I bought a duplex for $300,000 with my VA loan at 100% LTV. Last year I refinanced it with the IRRRL at 2.25%. In the last few months there have been comparable sales that have closed in my county at $549,000. Assuming my home would also appraise for $549K, that would leave about $255K in equity.

I am looking to take out a HELOC so that I can create some options to buy more real estate with. I have many ideas and several paths I could go, but the first step is to open up a HELOC.

I spoke with a local bank, First Citizens Bank to open up a HELOC. The draw to them was the 89% LTV. When I spoke with them, they said they could not open up the HELOC because it is not solely a primary residence. They wouldn't loan because I receive long term and short term rental income from the property.

The second bank I spoke to was United Federal Credit Union. I had heard they did HELOCs on rental property at 80% LTV so I started the conversation with them. They also would not approve the HELOC because even though my long term tenant covers all but $25 and I received STR income when I am away from my primary home, they wouldn't open the HELOC because I live there.

These responses seemed like a Catch 22 and I am not sure how to proceed.

Which leads to my questions:

1. What Lenders might approve a HELOC on a primary residence receiving rental income?

2. If I can't find one that will do it, should I shift my focus to just buy another primary residence with the remaining VA eligibility then apply for the HELOC again?

3. Or should I refinance the duplex at a higher interest rate and pull out my equity and buy other real estate with a 20% down payment on more than one property? I think this would free up my VA loan to make another purchase, as well as a higher return on equity.

4. Or a combination of #2 and #3?

5. Just hang tight and continue to pay the mortgage?

Thank you for reading these semi complex questions. I am open to any and all feedback as I get clear on a game plan moving forward. 

Onward and Upward. 

 Correct. 

Again, remember, you didn't have the down for the most recent property purchase, you borrowed for that, so now that property is way over leveraged. It's very important to NOT move forward until what you have, is stable. As you pointed out, it's deep-deep in the red. So, you need to clear that borrowed down, to get stabilized. 

Picture this, say you said F-it, it's all about just getting more. Now the next one is going to be probably a DSCR, because your running in the red on previous so that's not a great look for conventional. Now interest rate is going to be very high, your going to have to use ever liquid penny to get it to approval to close, and at end of day it's most likely to have little to no cash-flow.

So what you have then is 3 properties, and near to 0 cash-flow with all but 0 contingency funds. That's 3 properties that can have a roof issue, plumbing issue, HVAC issues. That's 2 properties that can have vacancy issues, tenant damage, etc.. And you have nothing to fall back on for unforeseen. 

Everything has to go right, for many many months, or else things can get very very ugly in the blink of an eye. And then your coming to someone like me, needing the cash infusion to survive, and I and others like me are not a charity, it will cost, dearly, that's just the reality of it. 

Or, you clear this HELOC, get the leverage into a healthy zone before growing. Growing when it's healthy growth.

Yes, I am saying use that "parked $" that inflation is eating, to pay down/off that HELOC, with 1 exception, you do need to keep enough liquid $ for working capital, that's regular potential expenses in the short term. Because it's a HELOC, that means if need be you have ready access to pull $ if any big unforeseen expense happens, right, so working capital does not need to be a massive amount at this moment long as you have HELOC backup.

Look, you can't think of this as a "loss". Keep in mind what you did, was taking out a loan on future earnings, borrowed from your other property. If it were a bank vs your property loaning the $, you'd have no question on it right, you'd be all-about getting rid of that loan. You need to treat yourself with the same respect. Because it's an over-leverage position, we know that because if refi into a singular it would be WAY into the red, so we need to deleverage that property. 

Maybe that's the most important mindset for this, think on how you took a loan on FUTURE earnings, so now, you need to pay off that loan taken. 

I know it sucks exercising the additional patience but it will breed good things to come, you will be very happy for having done it going forward.