All Forum Posts by: Scott Hollister

Hello Everyone,

The Central CT REI group is happy to have @Ted Lanzaro for our February meet up. 

CPA Ted Lanzaro is one of the rare CPAs who is also an active Real Estate Investor. His keen interest in both disciplines drives him to understand the intersection of Real Estate Investing and Taxation like few others do.

Lanzaro CPA, LLC is a national boutique CPA firm specializing in strategic tax minimization services and accounting for the real estate industry. For the past 24 years, CPA Ted Lanzaro has helped thousands of real estate business owners, entrepreneurs and investors all over the United States implement cutting edge tax strategies that save them thousands of dollars annually on their taxes.

Mr. Lanzaro is also an expert real estate investor and broker with 12 years of experience as a residential landlord and real estate rehabber. Lanzaro CPA brings real estate investors the expertise and services they really need to be successful in their business and minimize the amount of income taxes they pay annually.

We hope to see you all at the meeting before tax season starts! 

-Scott 

Hello @Dennis Smith and welcome! 

The best strategy is to have your money make your money. The vehicle (buy & hold SFH, MFH, etc.) is up to you and where you are as an investor right now.

You will hear many different ideas from some amazing and creative investors on the site. 

1. If this were my first buy and hold and I had 80k: In my market REO's are typically 100k-110k for a 3 bed 1 bath so I would need to partner with someone. In your market, 80k might be able to get you purchase, rehab, AND holding costs before you get it rented. (1st thing, find and study your market to see your buying power)
2. Finding a partner isn't that hard. I would focus on finding a partner that will not take a part of the profit. Just one that is happy getting a return on their money. (Typically 10-12% annualized. These are interest payments paid monthly, if you're good you will have your tenant pay them) Hard Money is expensive but it is a tool that is there. 
3. As far as strategy: The goal with your 80k is to NEVER spend it. Sounds weird right? Ideally you want to be able to pull that money invested into a property back out after you have it rehabbed and rented. (Brandon calls this value add the BRRRR strategy) It is worth looking into because you are leaning towards rental investments.

Good luck Dennis! 

Welcome @Kyle Teague to an assume community of REI!

As a fellow teacher and REI I know where you are coming from! The best blessing for you, as a future professional Real Estate Investor, is being "restricted from managing my own properties." This will allow you to continue your passion with true passive income. 

Kyle, this is the most important thing a "teacher" will ever tell another teacher, you have NO limits. The only thing you have to decide is: 

1. What are my goals? (5k or 10k a month passive income?)
2. How to reach my goals? (Bite size chunks broken down)
3. Then choose the best vehicle with REI to reach them.

The best strategy will vary, some may say:

• Partner with an experienced investor for your first time. You can fund the deal (Your 20k+hard money/private funds) while your partner is the "boots on the ground" guy, completing the labor and splitting profits 50/50.
• Or some might say, try the BRRRR strategy out! Acquire the property (Your 20k+hard money) while your still away and then manage the project during the month you're home. Keep it as a rental and cash out refinance after the seasoning period. (6 months-1 year depending on bank)
• Or you can be completely hands off and invest in crowd funding. 
• Another option is a house hacked duplex (Up to 4 for conventional financing). But then again, if you're only living in it for 1 month... It might be a great way to acquire it as a owner occupied low down payment. 

The point is REI is endless and it starts and ends with your creativity!

Don't worry too much about the 1% or 2% "rule", it is more of a guideline. I would put effort on your education of finding deals and analyzing them. IF a deal is a deal and you're netting a desirable profit for the time/money invested, then it is a true investment. 

@Pat McCandless I believe we have locked down an REI CPA for our next meet up in Manchester on Feb 7th at 6pm. Hope to see you there!

@Kevin Hunter I use FINEX Credit Union. They have good rates on them but not mortgages. Let me know if you need the contact information for the girl who does the HELOCs. 

Main Branch is in East Hartford CT. 

Hello @George S.,

Yes, HELOC's are a great way to acquire Real Estate. I just did one with the BRRRR strategy, the 4% was cheaper then the 12% interest only payment with Hard Money. I used the HELOC for the down payment and had HM cover 85% of the purchase while funding the rehab 100%.

To answer your question, they will look at that as a good equity position for you (the borrower). Since you own two houses, they feel "safe" as having the houses as collateral so that you can borrow against against them. 

Things to know about HELOC that I learned:

• Typically banks go up to 80% of the appraisal. Usually they will pay for the appraisal, if it comes back really low then tell them to go back again. (Mine came in 60k less the first one)
• Around CT I found credit unions that go up to 100% LTV, it is more expensive. My advice is to split the difference at 80% LTV between the properties (leaves you 260k which is more than enough to get started) Maybe you only get one to start (depending on how cheap your market is).
  • *Because once you start the process then that 10 year period starts, so if you won't be using one for another year then don't waste your time on getting it. (But it can be a back up and the yearly fees are under $100 for my HELOC) Choose what is best for your REI.
  • If you don't "draw" on the money you won't be paying the interest payment, just the yearly fee. 
• Check with your bank to see if they will do a HELOC on a non-owner occupied house. (I doubt you live in both?) Maybe you can swing a bank line of credit and use them as collateral? Its all on how creative you can be! 
• Typically HELOC's are a 10 year interest only payment, then 15 year repayment after the 10 year mark. Your goal is to rinse and repeat this money as quick as you can netting you returns ABOVE what you're paying for the money. (Factor in your time invested to make sure the return is worth it) 
• If you're just starting I would start with one property, choose the method of investment (rental or flip). This will give you the direction of your rehab. Then you can line up the cash out refinancing for the rental if needed, or sell. Either method you WANT to pull all your money back out. DON'T leave money in the deal. This will allow you to scale up quickly. (Read Rich Dad Poor Dad)
• Call around to every local bank and don't get discouraged by the "NO". Hearing no is part of the game, develop thick skin and move onto the next bank!
• I also heard that having HELOCs on paid off houses looks like you have no equity in the property if a lawyer is looking to go after you. This would be in a lawsuit situation, but your a wise/diligent investor so I don't see that happening:) 

Good luck and keep posting! You will learn so much from all the experts on this site! 

@Tiffany S. For a cash out refinance (Conventional 1-4 unit) the house will have to come out of the LLC and in your name to get financing. You can always put it back in the LLC but the bank could call the note due because like @Chris Mason said, it is the infamous clause! 

Chris, I have heard both good and bad:

• Good for investors because they hold the asset in the LLC. (Protection) But @Joe Splitrock brings up a very valid point, LLC's have "perceived protection" that can "easily be pierced". The important thing to note is "avoiding risk". Be a diligent landlord, treat it as a business, and have good insurance. 
• Bad because every attorney we had at our meetings said its completely illegal to do (triggers the due on sale clause)

I'm not looking to break the law but I would like a clear cut answer of what is a proper balance of protecting myself and my assets that I work so hard for. So thank you @Mindy Jensen for starting this thread:) Maybe @Brandon Turner can write The Book on Using LLC's: How to Protect Yourself While Playing Real Life Monopoly! 

Welcome @Dennis O. Evans, 

May I offer you some wise advise?

First I will answer your question: The best way to pull your money out after the deal is "seasoned" would be to cash-out refinance. Typically the major banks have a seasoning period where they won't lend you money on the ARV value (After repair value) under a year. You want them to lend you on the ARV because that is the higher value then the AS-IS value. Lets say the house appraises for 100k once finished, then you will hypothetically be able to pull out 80% LTV (Loan to value) So $80,000.00. Otherwise they will only loan you 80% value on the purchase price before year 1, so $32,000.00. Which doesn't help you because you leave your money in the deal. 

I have found that the major institutions have a 1 year seasoning period. However I have found that it is only 6 months, so 6 months and 1 day I am performing a cash-out refinance based off the ARV.

Again, if your impatient (Like me) you can find local credit unions that don't have seasoning periods, check out podcast 197 to get your creative mind flowing:)

Or you can decide to go commercial but you won't find the terms as favorable as conventional. 

*Important note for conventional: Make sure you have 6 months reserves to refinance out. 

Ok wise advise time! 

1. Can I talk you out of using credit cards?! I know this is a last ditch effort, and I applaud your willingness to take risks. But if you can't refi out you will be shoveling money to your cards and the unsecured loan which defeats the purpose of real estate investing. 
2. My advice would be to partner with a HML, for the price range you have outlined (Even though I think the 40k is below minimum loan amounts, maybe they can tie in the rehab for a higher amount?)
   1. THIS way you will be able to spend $0 of your own money, use the unsecured loan (If terms are favorable) and the rest of HM, they will cover rehab costs. Then you get to keep your 13k as a safety net/reserves for the refi:) Plus all the while creating a relationship with lenders for the next go around! 

Forgive me if I am credit card adverse, but the +22% interest can get crazy real quick! With HM you're looking at points and 12%. If you do the BRRRR then your tenant will be paying these costs.

So hopefully I offered some insight, best of luck with the decision Cordelia! 

Hello @Keegan French!

You will find BP a great place for your goals! We would love to hear about the property management company from the accountants side! Feel free to come to our next meet up in Manchester! (Feb 7th at 6pm)

Best of luck with the REI!

Hello BP and @Mindy Jensen!

I can only speak to my experience and what I've learned this year with two houses and a guest speaker. I completed a BRRRR and still working on a FIX & FLIP. I chose to start my LLC for a few reasons, mainly lending and credibility.

• I used Hard Money for my BRRRR house and I found out that most HML will only lend to an LLC. (Good to know before looking for a house if you plan on using HM, you don't want to find a house that is great deal and have it fall through because of financing)
• I also found out that having an LLC adds a certain amount of credibility to your business. (That is right, you ARE creating a business and it should be treated as such)
• We had a local RE Attorney in CT come in and speak to our group. He recommended a Intervivo Trust (AKA Living Trust) over an LLC. (One of his reasons was that the Intervivio Trust is financeable in non-commercial transactions)
  • His take away was "Build your business around profitable Ideas"

Again, you will hear this the most: Please consult with your attorney:)