All Forum Posts by: Larry Turowski

@Timothy Allen everybody uses HELOCs. Just be sure you’re numbers are right. 

@Carl Simon Congrats on the good problem! Anything you buy in the same market will also likely appreciate similarly, so I'd starting looking around and see if you feel confident you can find a multi that fits your goals. If so, sell. If not, think about getting a HELOC. You'll get some liquidity and that may be enough to buy something when you do find something you like.

Quote from @Ryan Kelly:

@Jack Miller selling makes you money, holding makes you wealthy.

I don’t know who coined this phrase, it has been tossed around forever.  Or being really rich vs being wealthy, that rich means having lots of money and being wealthy means having revenue generating assets which is somehow better. It’s an artificial distinction, and, frankly incorrect.

You can flip a house that makes you a big profit. You wouldn’t want to flip a house that wouldn’t. Whereas people by real estate all the time at or near retail that generates revenue but they couldn’t sell it and make a profit.

Someone with money can easily pivot to being a passive buy-and-hold investor  Buy-and -hold investors can’t always pivot to selling to make money.

I am both.

I enjoy flipping more than holding. It knocks the socks of holding as far as returns go. But flips are not easy to come by or always easy to execute (sometime they are).  Plus I really like being liquid. Having cash for flips means I can jump on deals. Having cash means I can weather storms. Having cash give me the cash to put into the next buy-and-hold.

Buy and holds give me predictability and better scalability.  Flips give me cash.  Now I've got to start flipping apartment complexes.

@Joe Farruggio The best way to reduce your taxes is to lose that gain. Do another flip and lose money.  Just kidding! Taxes generally mean you made money. That's a good thing. You did really well. We all want to minimize our tax footprint, but there isn't much you can do in this case.

@Dhwani Shah I agree with others here. What is most important for you to know right now, since you feel a little taken, is that free rent back is pretty common right now in this market. It’s normal. You made it easy for the sellers to say yes to your offer. Your risk is pretty minimal.

You got an inspection. That’s pretty unusual these days. Most buyers are willing to take on a no-inspection risk in order to secure a deal. That’s way more risk than your (free) rent back.

So relax. Nothing unusual happened and you’re in good shape.

Quote from @Christian Harris:

Quote from @Russell Brazil:

Appraisers have a copy of the contract in hand. So they know what price to shoot for.

 Ha, now I see how we got in this mess :)

 Not really, or not entirely. There are often multiple high bids. Realtors can show those to the appraisers. If you have 3-5 all in the 1M range, that pretty well sets the market. In addition, the appraisers are seeing the same thing happening with other houses, so the market trend is pretty clear. When it is not clear then the appraisal will come in low and the buyer needs to cover the gap, if they can.

Those automated appraisal estimates are not using older comps. With the market changing so fast, six months can make a big difference. 

@Angela Zanti You don’t know what you are trying to accomplish yet. 

Before hiring a mentor, I suggest taking at least a dozen investors out for coffee or lunch. Maybe also message some here and ask if you can have a 20 minute conversation. Lots will be glad to help you. 

Like the podcasts, ask them how and when they got started, what different strategies they’ve employed, how they like it, how it is working, advice for newbies, pitfalls to avoid etc.

After a number of these you’ll start to develop an idea of what direction you want to go in and if you still feel like you’d like to hire a mentor, you’ll better know what skill set you want in them.

Heck, maybe you’ll find you can get enough mentoring piece meal just taking investors out for coffee. 

Quote from @Rahim Davis:

@Larry Turowski Stocks do leverage like real estate. Options are key to leverage in the market.

You can call that leverage. But you can and usually do lose the entire investment. People who invest solely in options are not really leveraging. They are really smart and are playing out the average between the few wins and the many losses. Otherwise options are used like insurance. You usually don’t need insurance so it feels like throwing your money away, but you’re glad you have it in the rare cases that you need it. 

Quote from @Jeremy Kitchen:

I found this post on a reddit search

"I have a house as an investment property with equity I'd like to access to buy a home, but because banks think everyone lost their jobs and because of this many will default past the forbearance, trying to get a cash out loan from an investment property is ridiculous, with a 710 credit score, they were asking 5 points to pay down the rate to something reasonable (4-5%), eating into the cash I can get access to. I don't want to seek the house (15 years left).

So, I found an alternative where a company, such as HomeTap, essentially invests in your home, gives you cash, does not pull a hard credit inquiry. In return you agree to sell the house in 10 years or buy-out their position in the property. I am assuming they get added to the title for a specific percentage of the property and reap the benefits of both fees and appreciation and can force a sale if you don't sell or buy them out."

That makes it sound like they have a lease or buy option to buy your house in 10 years.  So say 10 years pass, and you don't have enough instantly available to payback their terms of the loan, they might get first option to buy from you or force you to sell your property to them. 

That being said, all the reviews seem legit, but keep in mind, companies can buy reviews as well.  If you're interested, just make sure you read ALL the fine print, and protect yourself/your investment first.

 Here is how I imagine it works. Or how I would work it if I were a bank. 

I am a bank and I want to make 5% on the loan. Why is 5% good to a bank, after all the stock market averages 7 to 8%?  Well, you see, the bank only needs $10,000 to make a loan of $100,000. The rest is basically created out of nothing. So 5% of 100,000 is 5,000.  They make 5,000 on 10,000.  Talk about cash on cash return!

Okay getting back to hometap. Lets say you have enough equity that they can give you 10,000. And the house is currently worth 100,000. They could structure the investment to be 10% of your home equity, growing at 0.3% per year (and they Amy assume appreciation would provide another 0.2%) or 10,500 in equity after the first year and increasing by an amortization table, whichever is greater. 

You settle when you sell or within 10 years, whichever comes first. 

The benefit to the owner would be no payments. But it could come at a steep cost.