All Forum Posts by: John Verduzco

Had some success with finding 3 banks that go to 89.9% (banking regs prohibit full 90%??) LTV. Try PNC, Suncoast Credit Union and First Citizens Bank. Keep in mind, I am in SWFL so you may have other options for CU's in your area. We went with First Citizens - great experience, great loan. We had a first mortgage of $280K with $400K value. They did $79.5K HELOC. The appraisal is everything, so "help" your appraiser to make sure you get the value.

Welcome Patrick. As a Naples investor, I faced some of the same challenges (low multi-fam apartment options).  Fortunately, it got me looking harder at Mobile Home Parks as a multi-fam alternative.  Condos have a double problem - they don't cash flow as well (as you know) AND their appreciation lags single family (first to depreciate, last to appreciate).  Our strategy is to live in condos (including rent) while we buy and hold (rent out) single family. 

we have done several loans on our single family rentals including conventional (30 year fixed) on 1-4 and 5-10. We have struggled to find 2nd position HELOCs on those but had some success. They are typically low cost (appraisal only) interest only with a draw period then pay back period. Just have to way a cash out refi cost and rates and cash flow vs HELOC and its flexibility to be used like a credit card and pay back more quickly if you desire. We used TD Bank on our HELOC. They did 75% LTV.

The best investment is in your level of understanding.  Educate yourself on not only geographical markets, but also the different asset classes including multi-family.  We have invested $M's in our own capital, but with a commensurate investment in time to understand multi-family properties and how they will perform.  We happen to like mobile home parks based on the current household incomes in the US and the barrier to entry of building new MHP's.  I don't endorse any one education system, but for MHP investing, you can check out Frank and Dave's version http://www.mobilehomeuniversity.com

Every investor has different goals, so markets and asset classes will come down to what you are trying to accomplish and your time horizon.

OK. Is there a market for private lenders with 1st position on performing rentals (5 year term or less) at 6+%? If so point me in the direction please. I may be interested in lending on those with professional mgmt. and track record.

Risky is a relative term related to ones ability to analyze the collateral.  For me risky is stocks and mutual funds without any principal protection and no cash flow (because they lack transparency and I lack knowledge).  In this case my mom is 2nd position where both loans 1st and 2nd total $200k. Rental property value is $320k. Is this "a lot of equity". To me it is reasonable for fixed return and full transparency of a performing, professionally managed rental home in Naples (where we live). 1st position on a flip at 18% can be "risky" if you don't understand how to analyze the deal. 

Hi Jason - I am in Naples and my mom (who lives with us after my dad passed) was in a similar situation.  We helped her take her funds ($70K) into private lending.  She is getting 6% ($350/mo) by loaning on a solid performing single family rental property that is professionally managed.  2nd position, Interest only with a 5 year balloon - good cash flow and  great principal protection based on the overall loan to value.  Fully recorded note and mortgage against the property of course to protect her and her heirs.  If you are an experienced investor and know how to vet the property, lending on an existing rental property can be a strong option.

There are much more scientific ways to analyze market value changes and rental rate changes, but an eye opener is to look at your contracted property in Zillow.  Yes, I know, Zillow is Zillow, but the 10 year Zestimate history is typically the same "shape" - a sine wave (with a peak and a trough).  Denise Evans is correct - every year we need to know the current value AND where are we on that wave.  The real advantage of disciplined buy and hold cash flow investing is that you don't need appreciation to be happy.  If your cash flow returns make you happy, you can always wait out the wave and hold for the next peak (market cycle) before you sell (exit).  Keep in mind, that market cycle peak/trough is not as pronounced in all parts of the country (many areas see small changes from top to bottom).  Florida markets, on the other hand...

Brie is right - this is a spreadsheet waiting to happen, but the answer depends on your idea of what good looks like.  in other words, best case is defined differently for different people.  For some, lowest monthly housing costs, for others highest monthly passive income, for others pure cash on cash combined return for any new capital used.  

As an example, if my goal was CoC return - I would absolutely free up the equity in the rental (or rentals) but not to tie back up in my primary residence. I would likely analyze freeing it up for other investments and put down as little as possible on my primary residence (knowing that could increase my housing costs) with the goal of using the capital that I didn't put toward a down payment to create new cash flow to offset increased housing costs (larger P&I and PMI) related to lower down payment. Another option would be free up equity in rental (or rentals) and set your primary residence loan at a "comfortable" housing cost with 20% down, but immediately put a home equity line of credit (HELOC) in place (you should be able to go to 90% total LTV). This could give you access to $50K (10% of home value) to be used when you find the next deal, but you won't have to draw on it until you need it. We like "access" to credit infinitely more than debt or cash. Lots of ways to do it, up to you and your goals.

Hi Nick - welcome to BP.  I am a Naples, FL based investor, but have invested in several parts of Florida (Tampa, Panama City, Cape Coral, Naples) and Massachusetts.  I may soon be in your shoes as my wife and I are considering a move to Melbourne, Australia.  We were just discussing how to best engage with the right people on the ground in Melbourne.  Haven't yet researched it, but assume a BP or BP like forum in Australia exists.  Let me know how I can help here in the States.