All Forum Posts by: Josh Young

@Justin Rush I agree with @Account Closed

My advice would be to take that money and invest it into a deal, you will learn a lot more and make a lot more money from doing deals then you will from any class/program/membership.  If you need more education then read some books, they are much less expensive.

@Jack S. You are smart and I love that you recognize the 15 year term was a mistake (not a big mistake though), I did a 20 year once and later regretted it when I learned to calculate return on equity. If I were you I would consider the HELOC to use as a down payment on another property, a cash out refi would be tough with that big of a jump in rate, but calculate the blended rate and compare the two just to make sure. You can pay the HELOC back when you do a refi on this property or on another property in a few years. You don't want that much equity just sitting there not working for you, especially if you have a high paying job and can afford the payments on the HELOC. You should calculate your return on equity to help you make a decision, but generally as a rule of thumb if your equity gets above 60% in a property then you should take it out with more debt and keep growing; the use of relatively inexpensive debt/leverage is one of the major advantages real estate has over other asset types.

@Greg Heden 

If the money is from a cash out refinance then you are likely paying higher than a 5% interest rate on the money, so you would be losing money if you just leave it in a MM account.

ConC return is not a very good measure of a real estate investment (unless you are investing in class C/D and it sounds like you are not), as you mentioned you will also be getting tax benefits from depreciation and those benefits will be at a high rate because of your tax bracket, so I would try to calculate that and quantify it. Also, if you are investing in a great area then you should calculate some sort of appreciation in property value and rent growth, somewhere between 2-5%.  It sounds like you might not need the cash flow to be positive because you have other forms of income to support your overall cash flow, but if you really feel you must have positive cash flow then you could just put 40-50% down and then do a cash out refinance in a few years when rates drop and values and rents are higher.

I would not ever recommend renting out a non permitted space, especially not as a residence for someone to live in. The DSCR loan on the new investment property will be based off the new property only and should be able to make that happen getting above a 1.0 DSCR, might need to put 30% down, but that should cover at least it will here in Arizona, I'm currently working on deal that's very similar to this. You will be negative cash flow by the amount of the HELOC and repairs/maint/capX/vacancy/management, but if you can afford to cover the negative cash flow then you will be building equity and getting started. When your income improves and you can qualify personally then I'd recommend buying property as a primary residence, the terms tend to be favorable.

@Geoff Regan you need to talk to a mortgage broker as they will have access to different loan products that will help you. The HELOC will be helpful, but you might also need to use something like a bank statement loan rather than a fannie/freddie conventional. Or you could stay living where you are, still rent out your guest house, and use the HELOC and a DSCR loan to buy an investment property. Either way, a mortgage broker will be able to help you.

@Gregory Robinson where are you located? What's the address of the property? Is it vacant? We will be able to help you if you provide this, or can at least point you in the right direction.

@Daniel Boone wouldn't you want to list it on the MLS with an Agent, so you get maximum exposure.

@Brian Berry have someone buy a lock box and put it on the water pipe on the front/side of the house with some keys in it and just give the combo to people who need it, maybe have someone change the combo every so often if you feel you need to.

@Bryan Place an appraiser might have a hard time getting comps that have an ADU, so they will most likely be conservative and only give you something like $100/sqft or maybe less, but if it's attached to the home and you make it accessible from the interior then the square footage can be counted as part of the home and it will likely be worth significantly more, something like $200+/sqft. Technically this means it's not an ADU, but I have heard of people doing this for the permit and appraisal and then closing off the interior connection to make it a rental and then just make it easy to re-open the interior connection when you go to sell if you still don't have comps to support the value.

@Brandon Lee 

either the property has declined in value, so the seller just wants out, 

or the buyer is paying a large down payment to the seller, 

or the buyer is making payments to the seller for that portion in addition to taking over the loan, 

or usually some combination of these.