All Forum Posts by: Larry Turowski

Refi means refinancing, which means basically getting a new mortgage and the funds from that are used to pay off your original mortgage.  (Even if you had no mortgage it is called refinancing.)

If you got a mortgage for the same amount, you’d just basically be replacing one for the other. You might do this because the interest rates are better, for instance.

Cash out is a colloquialism that refers to getting a bigger mortgage than your original and you pocket the difference.  If the terms are basically all the same, but just the amount of the mortgage is bigger then you’ll obviously have a bigger mortgage payment every month. That is  fine when you collect enough in rent to cover that and all other bills.  Hopefully you still have a little left over after all this that actually goes into your pocket, that’s called cash flow.

Now you can take that money from the cash out refi and use it as a down payment for another investment. And so on and so on.

You’ll have to speak with your lender to find out what percentage of the value of the house you can get a new mortgage for.  Let’s say it is 80%. In your case 1,20,000 using your notation or 120,000 using American notation. 60,000 would be used to pay off the original mortgage and you’d pocket the other 60,000 (minus some fees). And you’d have a bigger monthly payment. 

@Vaughan Moody Get a home equity loan (a second mortage, basically) or HELOC. This way you keep your original, cheaper financing in place and get a loan against the remaining equity you have in the property.

The only reason you would want to restructure existing debt is for more favorable terms--that may be interest rate, length of years (i.e, lower monthly payments), or being able to take out more than you could with a home equity loan and having two separate debts on your home.

In some circumstances, like the third one above, it may make sense for you even at a higher interest rate, because the other terms make the overall deal more desirable for you.

@Mark Fitzpatrick Absolutely not.

1) You owe 45k and they are putting 17,900 down, so you'll have to come out of pocket to pay off the other 27,100 to the bank, not put money in your pocket.

2) It's a hot market. You don't need this crazy exit.

3) You can invest and do a lot better than 4.5%.

4) You are already worrying and you'll be worrying about this constantly for the next four years.

5) If they don't pay you'll need to foreclose, not just ask them to leave, like a tenant. Ever done that?  That's an expensive mess.

I could go on. This is just such a colossally bad idea.

@Mike Lynch Sell.  If it won't get much more than 1,200/mo and it is worth 240k then there are much better things you can do with that money.

@Anna Marcotte I can almost guarantee the house next door was bough off market. Put in a lowball offer, as another said. It can’t hurt and honestly is easier to do with the separation a realtor brings.

In a competitive (the house is listed) sellers market it is difficult to buy at a sensible price as an investor. 

@Brandon Rush my first inclination is to say just start making calls.  When the vast majority of the leads will not pan out (it’s largely a numbers game), you are not wasting them by using them to learn as you go.

But then, I think, hey even though I'm pretty good, maybe I need to tighten up my negotiating skills too. So I’ll talk with you. DM me.  

@Brandon Griffin great idea meeting actual investors for coffee. I 100% recommend this. 

But BP isn't necessarily the best way to meet investors. Go to a local REIA meeting. Or call up "for rent" postings to get in touch with owners. Ask investors individually if you could take them out for coffee. You'd be surprised how many say yes.

You’re basically asking for volunteers here. Have you ever seen anyone ask a group or send a message to a group asking for volunteers. A small fraction reply and agree. Ask people individually and your success rate goes up by many multiples.

I even see this in church. Would anyone like to close this meeting in prayer?  Maybe 1 out of 20 people will raise their hand. Ask, John would you close us in prayer. 90% of the time they are happy to. 

 I wouldn’t mention it until you need to. 

@Jay Jones I wouldn’t call this gone bad. It’s a hiccup. You’ve got over 60k of equity from the sounds of it.

Worst case scenario, sell the house. You could talk to your tenant, explain the situation, ask if they could leave, and if they balk say, “Look I’ve got to sell it, how about if I cut you a check for 2,000 at closing. We can put it in writing. You’ve just got to keep the place neat and tidy for showings.”  Then go up from there if they balk. 

Or do some research for asset based lenders—hard money lenders for landlords and see if you can get rates you can live with. 

@Rain Pecson You could. You shouldn't. First, don't tie up properties you don't know that you have buyers for unless you can close on them yourself. Second, most investors don't like deals passing through multiple hands, especially listed properties. It may be nitpicking, but the property is already being marketed, you don't bring much to the table. And the agent won't really appreciate either. If you have a great buyer, the better way to do it is talk to the agent, tell them you'll bring a buyer to the table for a fee.

In reality, you should be finding off-market properties.