All Forum Posts by: Stephen Leblanc

Originally posted by Eddie Ziv:

Jade,

I cannot advise you on Multi-family since I don't own any but for me, it doesn't really matter of you own three houses that cost $100,000 each or a triplex that cost $300,000. 66% of occupancy would be the same for that triplex or those three houses combine.
.. And By the way, I'm an AD (Asst. Director)
http://us.imdb.com/name/nm0957306/

Good luck

The difference with owning multi units is the building prices are not directly related like the example above. Where I live I can purchase a single family home for 25-30K which will rent for 650 per month. Not that great of a deal since there is a demand for single family homes in my area. 2 months ago I purchased a 6 unit building for 60K which brings in rent of 2400. It was twice the price of the single family home but brings in almost 4 times the rent. So the vacancy of a single family home hurts a lot more than a vacancy in a multi unit building.

I liked mike's book. Look up member mikeoh.

I wouldn't buy my first home with cash. Assuming it is a building that will cash flow properly with 100% financing my goal would be to put as little of my own money in this deal as possible. This leaves me cash reserves to buy more property. You can have one property paid for free and clear, which is clearly a strategy some people use with great success, or you can buy 10 or 15 mortgaged rentals with good cash flow and take advantage of compounding. You have 10-15 rentals putting money in your pocket, paying off your mortgage, and reduce vacancy risk.

just sell it as quiet neighbors

Originally posted by "troyce1":

I always see people talking about using OPM. But wouldn't the best strategy be if possible to buy ALL CASH?

People will argue both sides of this, all cash vs other people’s money. For rapid growth, you can't beat OTM. How many rentals can you buy with 250K? Just as an example, let’s say the average house is 125K. With all cash you could buy 2 rentals mortgage free. Using other people’s money with 20% down you could buy 10 rentals. Each one of those units will be paying down the mtg for you and giving you equity. If you only needed 10% down, you could by 20 rentals.

Just a thought...

steve

just do a search on this site. I think it has been talked about quite a bit.

if you own the property, on a refi they will give you 80% of the apraised value. That is canada rules, not sure about U.S.

My bank still requires the 20% down, even if there is lots of equity. So I find that eats up a lot of my cash when I'm buying propeties. So the buy with cash and refi may cost me a couple of thousand on my mtg, but it allows me to keep the money in my account for more purchases.

Originally posted by "FSJR9":

I see -refinancing raises your LTV and directly has a negative effect on cash flow. Unless the purchase price is so low (50% or less of market value), doing these refi's can be dangerous. Is that pretty much correct? Also, do HELOC's differ from this?

I guess the specific point of my question is -what are some methods that rental property investors use with regard to expansion (other than owner financing, sub 2 deals, opc)? Waiting until cash flow generates income for further down payments?

I also can access a fair sized business LOC (which can be used to purchase, then finance conventionally). But even here, if I only can finance up to a percentage of the properties value, that means I have the remaining percentage (with a significantly higher interest rate!) tied up into this property. That does not seem like a good idea!

I know these questions are extremely amateur, but I greatly appreciate the responses.

Thanks,
Fred

If you are buying right, that is a great idea to purchase more property with no money out of pocket. Using the simple numbers above lets assume every house you buy is worth 100K. Lets also assume they will cash flow properly at 80K. Using the LOC you can purchase the property with cash and close more quickly, hopefully reducing your offering price. Lets say you can buy the property for 60K. That comes off your loc. The next day you go to your local bank and say you want to do a refi. They say they can refi for 80% of apprised value. You can now pull 80K out of that property, paying off your LOC, covering any closing costs, and puting some cash in your pocket for the next purchase. Mike is right, you should never pull money out of a property if it will reduce the cash flow to a level you are no longer comfortable with. Even in the above example the property would only cashflow at 60K you can take out a mtg for 60K paying off your LOC and only having to pay the closing costs out of your own pocket. By doing this you avoid having to pay a 20% down payment saving you 60K X 20%= 12K. This is why it is important to buy property with equity in it.

You could take the year and a half to learn the business of owning rentals and pay off your mtg. I don't think it will take you anywhere near that long to learn the business if that is something you realy want to do. Keep reading the posts on this form on how to buy properties properly (at the right price) and manage them. If you buy right you should be able to complete both your goals. A properly purchased rental property should pay for itself right away with positive cash flow used for unforseen expenses. It shouldn't cut into any of your personal finances. If you have to use some of the money you have for downpayment money, then you can get your rental and pay off your house in 2 yrs instead of one and a half.

steve