All Forum Posts by: Paul O'Connor
Paul O'Connor has started 10 posts and replied 31 times.
Post: Flood insurance can't be canceled and pro-rated? Is that right?
- Posts 35
- Votes 9
I think I figured it out... the insurance company told me that I couldn't cancel the policy, which didn't make any sense... I should be able to cancel any insurance that I don't want on my property. The only reason that I got flood insurance, was because I was going from owning the property outright, to wanting to get a refinance on the property to buy more investment properties. But once I found out how much money I was losing, due to ridiculously high flood insurance quotes... I cancelled the refinances. So, the flood insurance company, still had the lender listed on the property, who was going to REQUIRE flood insurance. That's why I couldn't cancel it, I figured that part out, now they'll let me cancel the policy.
Post: Flood insurance can't be canceled and pro-rated? Is that right?
- Posts 35
- Votes 9
Ok... so I posted a week ago about some refinances where I couldn't make the numbers work, because flood insurance quotes are just too high and ridiculous. Well, I ended up getting flood insurance on one of my properties (because of the refinances) and now, I'm being told that you CAN'T cancel the policy and have your premium pro-rated back to you. Anyone ever heard of this? Do I have any options, outside of contacting a lawyer? I literally got the policy 30 days ago. I'm open to your thoughts. The property is in Florida.
Post: Cash Out Refinance Nightmare, Help Me Make Sense of It
- Posts 35
- Votes 9
Originally posted by @Susan Maneck:
You can't do a HELOC as a portfolio loan but I'll tell you how to do these and keep your interest rates really low. I handle my HELOCs the same way I do my credit cards, by playing musical chairs with them. When you apply for a HELOC (and just do one at a time) ask for a one year teaser rate. About six months apply for another HELOC on a different house, again with a teaser rate. Use the second HELOC to pay off the first one before the year is out. Then call up WF and ask if they have another teaser rate available on the first HELOC (they always do.) I have three of these altogether, but there is no reason you can't get HELOCs on all five if you are patient. This year I didn't play musical chairs because my regular interest rates were so low it wasn't worth the hassle. Yes, they will still require you to get flood insurance, but given what you save on closing costs I still think it is the best way to finance cheap properties.
I feel like that would just get expensive with closing costs.
Post: Cash Out Refinance Nightmare, Help Me Make Sense of It
- Posts 35
- Votes 9
Originally posted by @Susan Maneck:
Originally posted by @Paul O'Connor:
The local Wells Fargo branch that I reached out to, would NOT do a HELOC on the houses.
I reached out to every bank, credit union, or other financial institutions within 20 miles... none of their loan officers were willing to help me. No one even suggested alternatives, they were quite useless in my search. I wish I had a relationship like yours with a local lender near me. I have great credit and plenty of income... that's why it was so baffling to me that no one would help me. And I'm also a very nice person, so it's not like I had an attitude on the phone with them, making them not want to deal with me.
Actually, I did not use a local WF branch, I applied online. Did you try and do all those houses at once? I've only applied for them one at a time. You do have to have owned them at least one year before you apply.
I applied for them all at once. I wanted to do a portfolio loan, to do it all at once and just make it easier and more convenient. I called the loan officers, figuring they'd be able to tell me what options were available to me, which an online application wouldn't do. They all told me that I had no options.
Post: Cash Out Refinance Nightmare, Help Me Make Sense of It
- Posts 35
- Votes 9
Originally posted by @Jeff Wydra:
@Paul O'Connor as I was reading through this post these were the three options I was thinking all along as well. Maybe the only other option I can think of would be offering your tenants a rent to own option? It would net you more cash flow and eventually get these off the books. Might be an option, might not. Thought I'd throw it out there.
That's not a bad idea... it's definitely an option worth considering.
Post: Cash Out Refinance Nightmare, Help Me Make Sense of It
- Posts 35
- Votes 9
Originally posted by @Susan Maneck:
Originally posted by @Paul O'Connor:
Originally posted by @Joe Norman:
As suggested above you could not borrow as much to keep your payment down and your profit up. Another thought is to leverage your equity with a HELOC - maybe you can find a lender who will do one of them without flood insurance. Good luck!
I reached out to every lender in the area and was told the same thing. None of them will do HELOCs on investment properties. I was told them wouldn't do commercial loans on residential properties and they wouldn't do residential loans on investment properties. I've had a lot of trouble even finding a lender, until I reached out to mortgage brokers.
Wells Fargo will do HELOCs on rental properties but they require flood insurance as well. However, I've been able to keep my interest rates well below 4% and the only closing cost on those is the appraisal. They are what I use for BRRR.
The local Wells Fargo branch that I reached out to, would NOT do a HELOC on the houses. I reached out to every bank, credit union, or other financial institutions within 20 miles... none of their loan officers were willing to help me. No one even suggested alternatives, they were quite useless in my search. I wish I had a relationship like yours with a local lender near me. I have great credit and plenty of income... that's why it was so baffling to me that no one would help me. And I'm also a very nice person, so it's not like I had an attitude on the phone with them, making them not want to deal with me.
Post: Cash Out Refinance Nightmare, Help Me Make Sense of It
- Posts 35
- Votes 9
Originally posted by @Tony Gorokhovsky:
@Paul O'Connor
Is this refinance a commercial loan? If so then you need to keep in mind it’s most likely in a 5 year lock and then it adjusts to market in year 6. Interest rates will go up and your going to be in an even worse spot.
General rule of refi is you want to make sure your covering all expenses and still having a small cash flow. I would definitely consider lowering your burrow amount to make the numbers make sense.
Good luck!
No, it'd be 5 residential loans. I just cancelled the loans... the flood insurance is just out of control.
Post: Cash Out Refinance Nightmare, Help Me Make Sense of It
- Posts 35
- Votes 9
Originally posted by @Jon Kelly:
@Paul O'Connor Probably doesn't make sense to refi at 75% LTV if they won't cashflow. Sounds like 3 options are:
1. Sell all properties and use the $750k+ to buy larger multi-family
2. Refi only the 1 property that is not in a flood zone and do nothing with the other 4 or sell them
3. Shop around for cheaper insurance
These properties don't meet the 1% rule anymore. They were probably great investment properties to begin with, but have seen strong appreciation. The best way to capitalize on the built-up equity is to sell.
Yeah, that's the feeling that I'm getting too... so I have to decide which option to choose. Might sell the 4 in the flood zone, and cash out refinance the one, might just sell all 5, or I might just hold all 5 and go the long way around.
Post: Cash Out Refinance Nightmare, Help Me Make Sense of It
- Posts 35
- Votes 9
Originally posted by @Joe S.:
Originally posted by @Paul O'Connor:
Originally posted by @Joe S.:
I know this sounds simple, but have you talked to a different insurance company as well? We had someone quote us a $7500 a year quote on a flood policy and then another insurance carrier offered one under $1000. Just an idea worth a shot.
Which insurance company offered you the one under $1,000? I'd like to reach out to them.
It was for a property in Mississippi. So unless your properties in Mississippi you would need to check out more than one Producer in your geographical area.
I've checked out several and I even ended up going to an insurance broker to have them reach out to more companies. The company you use, only does flood insurance in Mississippi?
Post: Cash Out Refinance Nightmare, Help Me Make Sense of It
- Posts 35
- Votes 9
Originally posted by @David A Lisowski:
@Paul O'Connor
Get other flood insurance quotes.
Borrow less until the payments are reduced enough to get back to positive cash-flow or buy a lower interest rate or combination of both.
Raise the rents.
A different lender won't get you out of flood insurance. The flood certificate determines that.
Been working on raising the rents, it's a hard pill to swallow for tenants that the rents keep going up. And they're good, paying tenants. But every time a lease comes up for renewal, the tenants get hit with a $50-$100 rent increase. Looking at the market rents... a few of the houses are a couple hundred under market rent. I think a $200-$250 increase in one shot, would severely aggravate the tenant. They usually get an attitude about a $100 increase.