All Forum Posts by: Michael Pearse

@Benjamin Black In this situation I recommend getting a home equity line of credit. The interest rate on a HELOC will be:

1. Significantly lower than a credit card

2. A HELOC won't disrupt the current amortization process

3. Will be cheaper due to not having to go through the entire refinance process, documents, contracts, ect. 

Best of luck!

@Nolan M. Using a small bank is your best option. You are more likely to find local banks allowing you to cash out refi before 6 months. As long as you calculate positive cash flow with the higher interest rate, I would recommend choosing this option. You will be able to refinance sooner if and when needed.

Best of luck!

@Jason Piper It is a little difficult to make a full calculated decision since I don't know how much money is in the deal and when additional rehab was done in the exact year. If you do want to get involved in some calculations you could try to figure out the time value of money against its current net worth with the income the home is generating.

Or ignoring the complex math problems, a good rule of thumb is if you can make 10X the yearly cash flow when selling, consider offloading the property and investing in another.

Cheers! 

@Cosette Trantow Glad to help. Yes I definitely do those 5 steps while in the inspection phase. 

Sometimes I will have a contractor walk through the property before I even make an offer if I know I am seriously considering the deal. If you have worked with contractors in the past (eventually you will once you find a good team and have a couple of deals under your belt), they will be glad to give you estimates before you make an offer on a property. 

As you gain experience you will be able to complete most of the steps before even reaching out to make an offer. That knowledge will come with time. Don't be too cautious to get started. I spent hours analyzing deals and still made mistakes. Best thing to do is fail forward. Meaning that you accept that mistakes will be made, as they always happen when you are new. (It's like taking a math class, you probably won't get it right the first time. But after iteration and iteration you eventually see the patterns and prevent those mistakes from happening again.)  Get through the learning phase quickly and learn from your experience so that you can start to focus on making forward progress. 

Cheers!

@Cosette Trantow I think you are on the right path, nice job. When you are able to make a move on a deal, definitely walk through properties to get a better feel of the condition of home. The rehab number seems low, especially for a unit that size. Though I agree, this estimation would be hard if you only have 1 picture and its on the outside. The inside can really be in any condition. If the unit was considered turnkey, assuming $10K for rehab is a good conservative number for this size. As goes for closing cost, you could reach out to a bank and ask for an estimate based off of the asking price and specifying that this is a fourplex.

Below are 5 tips below I would recommend when closing on an investment:

1. Pay for an inspection.

2. If you plan on doing any rehab, have a contractor/contractors do a walk through to get their opinion on the condition.

3. If you are using property management, ask them what is a competitive rental market rate for that area.

4. Obtain information about the previous taxes to gauge how much it will cost the next year.

5. Run the numbers again after doing all of these steps.

Best of luck! 

@Katie Jewell I am not familiar with any laws in Ohio. Though if you have not done so already, I would recommend the 5 tips below:

1. Pay for an inspection on the duplex. 

2. If you plan on doing any rehab, have a contractor/contractors do a walk through to get their opinion on the condition. 

3. If you are using property management, ask them what is a competitive rental market rate for that area.

4. Obtain information about the previous taxes to gauge how much it will cost the next year.

5. Run the numbers again after doing all of these steps.

Best of luck! 

@Joe Mazur Positive cash flow is a great sign that you are doing things right. Below are some helpful tips:

1. I would saving 5-10% of the cash flow for maintenance. The percentage will depend on the condition of the home and when you anticipate the next big ticket item will come up. Roof, HVAC, etc.

2. You should also account for vacancy, a good rule of thumb is to use a conservative number of 8% (30 days out of 365)

3. With the remaining cash, I would recommend holding onto it for the next property. That way you can benefit from the forward momentum of cash flow to build a larger real estate portfolio.

Cheers!  

@Martin Nowak I would recommend using a small local bank. They can transfer the rental property into the LLC for less than $1500. Shop around and you will find a good bank to work with.

Best of luck! 

@Kelly Moniz You could look into getting a HELOC to pay off the credit card debt. This would allow you to convert the high credit card interest rate to something more manageable, with the HELOC interest sitting at around 5%. Then make low monthly payments until the next deal comes around to get more cash.

Best of luck! 

@Josiah Santillana For the most part, yes you can. See the BP link below about the same exact question a few years ago.

https://www.biggerpockets.com/forums/93/topics/176...

Cheers!