All Forum Posts by: Kurtis S.

Hello BP fam,

We're branching out of Florida and looking to build our Utah portfolio.

We have a few properties we're looking into currently but need to build out our team.

Looking for Property Management primarily and will be adding lenders and inspectors afterwards.

Currently have a SFR we're analyzing in Washington Terrace, Utah and the Ogden surrounding areas.

If you're in that market and interested in connecting, please reach out! 

We currently have 10 LTRs and 1 STR in Florida along the east coast, mostly the Brevard county area while living in Indian River county. Happy to connect about FL REI as well.

Thanks!

Kurtis

As Scott suggested, that's what we're doing. About to move into a new construction (upon completion) then rent out our current home. With the way the market is right now, we're planning to do this every year to get in with cheap fixed 30yr money and low down payments then rent out after the year is up and we move again. Assuming it's newer build it shouldn't have major issues for a while so slimmer margins aren't as bad in the mean time until rents raise with the coming inflation.

I think that's a pretty good summation on what to do. Anything left out can probably be pointed out by the title company and lender letting you know what you need. PM me and I'll share the title company and inspector I like to use typically in Brevard. Also, often if you use the sellers title company you can get a discount on the owners title policy. The title company here will have an attorney on staff to make sure everything is legit etc. Good luck!

Long ish post of my thoughts with the new rules we're playing by. Looking for some outside insight to poke holes in the idea...

With the new methods of Freddie/Fannie around cutting back on secondary and investment loans I'm guessing the cost for those loans are going to increase. This has spurred incorporating the following idea more frequently:

Each year, purchase a new primary residence SFH leveraging the low down payment of owner occupied conventional loans 5% + PMI, lower interest rates, and cheaper fees since Fannie/Freddie will have no issue buying on the secondary market.

Taking this the next step further, there's been some new construction going on around me that are similar prices as homes that are 30-40+ years old due to the hot market. So buying the new construction to get the latest tech/efficiencies available. 

This should minimize the Repairs (since everything is new), Vacancy due to the SFH being newer and a nicer option than other homes in the area at a similar rental price point, potentially not need PM since there "shouldn't" be many issues. CapEx should be the same since things break at generally the same rate and should be accounted for.

The thought is if the LTR/STR comps could cover the PITI+CapEx and still cashflow a little with having so little locked in with good rates for 30 years, the rental rates will still rise each year that will catch up around the time repairs are needed. Since this is a new build, there shouldn't be a problem with a long term hold even if the market dips like we expect it to once interest rates rise so long as the rental rate covers the holding expenses.

Repeat this method each year after living in the home for the required time to avoid mortgage fraud. Long hold everything and let appreciating rents/home values out pace the increased taxes/insurance premiums each year. Once you hit the 10 loans max, find a portfolio lender to refinance with and put everything into a single loan they hopefully keep in house and potentially not report so you can keep going to get 9-10 more. When you have enough equity, cash out and pay off enough investments to live on the cashflow of the free and clear investments after proper PM+soft costs or dump it into a reputable syndication that will pay out what's needed +20% buffer to be truly passive.

Of course we'll still plan to have 6-12 months of reserves in place for each rental PITI that should/could cover anything that comes up and ensure the new residences LTR/STR rates should cover the holding expenses once we can move out.

What am I not thinking of that may bite me? or what are your thoughts of this idea?

The HELOC is like a credit card, you only have payments on the amount that you spend/draw on which may start the month after you incur a balance (which includes the initial closing costs). My HELOC had the closing fees charged against my loan amount and I had to start making payments against that amount the following month. Had I not taken a draw and paid the closing costs, I would not continue to have a payment.

If you get approved today for 120k, it'll take a few days/weeks to close on the process - they have to get the docs in order and get put on the insurance payee and register the second place loan against the property. 

The closing fees are not super high so I'd say the interest rate is more important imo. The closing fee is only paid once and you can pay off the loan and redraw for the period you have set. Mine is 7 year draw period then 7 year repay period.

It would probably make the most sense to try to BRRRR with the HELOC vs using it as a down payment for a buy and hold rental with the goal to pay the HELOC balance when you refinance but depending on the property the cashflow would still make sense to go buy and hold. This is what I did with a line of credit against my stock portfolio. I used it for closing costs for my buy and hold as it still cashflowed after my monthly re-payments to my lines of credit.

Some things to look for are a longer draw period so you can continue to recycle the money more without having to go through the HELOC application process again, the lower interest rate you can find, and an interest only draw period where you do not have to also may a principal payment if you do not wish to - this helps with the carrying cost logistics.

Good luck with your HELOC and your next deal! I'm currently in the market to find something to BRRRR myself using my available lines but it's getting more and more tough with the influx of buyers.