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All Forum Posts by: Brian Larson

Brian Larson has started 9 posts and replied 144 times.

Post: Refinance or Am I Pre-Paying Cashflow?

Brian LarsonPosted
  • Investor
  • Redondo Beach, CA
  • Posts 147
  • Votes 129

I knew you would find my post even though I couldn't get it to @ mention you...haha. and here you are, the man, they myth.

Post: Refinance or Am I Pre-Paying Cashflow?

Brian LarsonPosted
  • Investor
  • Redondo Beach, CA
  • Posts 147
  • Votes 129

@Patrick YoungI invest quite a bit differently than you and wouldn't keep the property to begin with due to negative cashflow and how much the house is worth vs what you could get positive cashflow with the equity you built up BUT with all that said, I will weigh in a little

I agree with @Charlie Fitzgeraldin that you should take that cash and put it into something that will yield more (with added benefit of diversification). Dropping your interest rate is great but there are costs in the refi (which I think you calc'd) and it will take 9 years to get your money back (based on doubling and counting + cashflow). There is a good chance you can get a better return than that with another investment (COC return of 15% is fairly reasonable)

If you do this, and then the property goes up more, than you will have your 25% in equity without putting anything in at all. Now, is the market going to keep going up? who knows.

I do want to throw one last thing out as a general principal. You never want to BUY your cashflow which is the root of this issues. Ben Leybovich talks about this a lot and at first I thought 'yeah right' but he is totally right. if you cannot be cashflow positive while financing 100% of the purchase/rehab then it is not a 'deal' it may work for you but it is not a 'deal' BRRRR takes this into account as well and I love the mentality. It keeps you very focused and strict on the buy criteria and honest with your self (instead of doing the eraser math game with yourself i.e. 'dang, it only gets me $75/month and my requirement is $100 so I am going to put another 5% down and then it meets my criteria, woohoo!'

I hope this helps and good luck.

Post: Latest brrr before and after.

Brian LarsonPosted
  • Investor
  • Redondo Beach, CA
  • Posts 147
  • Votes 129

well good luck! the latter part of the BRRRR strategy can be a challenge but not insurmountable.

I have to ask because it has been a problem for me...how were you able to get a conventional cash out refi for the full amount in less than 3 months? local lender? I just know Fannie frowns upon it and requires 1 year seasoning...thus why I use private money for a year then refi to conventional.

thanks for the response

b

Post: HELOC For Down Payment

Brian LarsonPosted
  • Investor
  • Redondo Beach, CA
  • Posts 147
  • Votes 129

There are lots of things going on in your situation. I will throw out a few thoughts.

1. how long have you owned the rental properties? This will be important for your lender to know so they can 'count' it as income and not just carry it against you. I want to say 2 years as landlord and many conventional lenders give you the credit

2. with the 401k loan and other mortgages you may run up against DTI issues but if your properties cover than you should be ok

3. reserves may become an issue (borrowing to get $ for place doesn't usually count as reserves) but you are under 4 props so may be ok

I would run the specifics of your situation by @Jerry Padilla he always has the answer to the hard question

b

Post: Latest brrr before and after.

Brian LarsonPosted
  • Investor
  • Redondo Beach, CA
  • Posts 147
  • Votes 129

Nice job @Nick Versetto

The numbers definitely play and the place looks great.

Quick Q. how are you handling the refi part of the equation? have you already refi'd to a portfolio lender or are you carrying private money for some time or...

thanks!

b

Post: Implementing BRRR in Order to meet 45th Birthday Goal

Brian LarsonPosted
  • Investor
  • Redondo Beach, CA
  • Posts 147
  • Votes 129

Hey Rob, so that side is a little slower. Luckily that is the 'easy' part in the sense that I have several note brokers and I just need to make a choice to buy one or two. My goal is to add 2 @ $25k per note returning 13% per year. I have a note in front of me that only pays 12.1% but is for $60k so I could essentially take down the note passive income and amount in one feel swoop.

Another reason I have been slow is because i have leveraged other investment opportunities. I am in a place right now where I have been keeping a healthy amount of cash for the purchase/rehab (B and first R before the other RR's) and also have enough cash on the side to either buy notes or invest in more appealing investments. As an example, I had a bridge loan out to someone wehre it was $60k for 6months and 8% return fixed (i.e. 16% annual). Instead of buying a note I took that deal.

I know I need to get on notes and have a way to do so, but just haven't pulled the trigger as I need the rental unit ramp more than the notes so most effort going that way.

Sorry, long answer to a short question.

Post: Implementing BRRR in Order to meet 45th Birthday Goal

Brian LarsonPosted
  • Investor
  • Redondo Beach, CA
  • Posts 147
  • Votes 129

So as I sometimes do, I forget I committed to a diary on how things are progressing. Luckily the inactivity on the diary does not mean I am slacking in the actual process. onward.

Updates:

  • KC 2BR picked up in September is rented out through 4/2017 so that is done. It was took a little longer to get the rehab done so we didn't have it ready to really be marketed until Thanksgiving and of course that makes it tough. I am happy to get it rented this month. rehab was on budget so that was great.
  • Indy 3BR picked up on 10/30 is almost done with rehab. Again, the rehab took longer than expected but only by a few weeks and is over budget by a whopping $500 so I am happy. Leasing agent walked it and thinks it will rent quickly
  • Bought new 3BR in Indy. it officially closed on Monday and we hope our rehab budget is in line. I think the area is a winner and we have a good opportunity to put a nice product on the market in late winter/early spring (goal of 6 weeks)
  • I have been looking at properties (or my people have) the past week and thought I had 2 really solid opportunities in KCMO. Unfortunately they just needed too much work to make an offer now. I am struggling in KC market due to only having MLS pipeline. I am hoping to get more access to courthouse properties and have a lead on what could be a solid wholesaler but TBD on both fronts
  • In Indy I have a property that almost works. I will need to offer a little under in order to make it work and pass if not accepted. There are other deals always coming to analyze.

My goal for the year was to add 6 properties but want to accelerate. Because I count 11/1 as the beginning of my year I am technically behind (added 1 on last day of last year and 1 this year) but hope to accelerate.

I will update as I get more properties under my belt and as status changes (rehab done, rented, etc)

Post: 30yr Loans vs 15yr Loans

Brian LarsonPosted
  • Investor
  • Redondo Beach, CA
  • Posts 147
  • Votes 129

Hey @Curt Davis

I probably show as a broken record on this topic as I give my .02 quite a bit but here is my thought and why I choose 30 year over 15 (you asked about 15 but I am giving you why not 15...for me)

Here is the thought, yes, if you crush it with a nice cash flow you can likely cover that 15 year not no problem and will save on interest AND get that much closer to the free in clear asset.

But as I said, I do not go that route and here is why...I go 30 year note and pay it like a 15 year note (simply run the calc and pay the payment just like you would a 15). This allows you to have a throttle back option if needed (long term vacancy, rents drop dramatically, big capex and the reserves just were not in place like you thought, etc)

Now, you do not get the advantage of the lower rate (generally a 15yr is 1/8-3/8 lower than a 30 yr note so it is not an apples to apples BUT you do get that safety blanket if needed.

Again, just something I heard a long time ago from a veteran mortgage broker and has stuck with me. Note that his advice was actually on my primary residence but the same concepts apply (pay more principal while you can, throttle back when you cant)

Post: New Kansas City BP Investor/Rehabber/Wholesaler

Brian LarsonPosted
  • Investor
  • Redondo Beach, CA
  • Posts 147
  • Votes 129

hey @Chris SicklerI also invest in KC and would love to connect. Per comment form Chris Suh above, where in KC are you advertising/doing business?

brian

Post: Advice on Currently Held Properties

Brian LarsonPosted
  • Investor
  • Redondo Beach, CA
  • Posts 147
  • Votes 129

Hello @Gigi Michaels

you mentioned a few things that I would consider.

1. the proeperties are cashflowing big....that's awesome, just make sure you are putting money away for rainy day

2. this sort of goes to my #1 point and is because you 'worry' about maintenance. Most every investment has fees/costs associated with it (its just the mutual funds/401k people do a good job making it seem like they are not much). With that said, don't fear maintenance, it is what it is. If you put away 5-10% of the rent for CapEx (i.e. large maintenance like roof, HVAC, etc), another 5% for maintenance (leaky faucet) and 8-10% for vacancy (although with your area you might see much lower I still like to lock it away) you will have plenty of reserves for that time you need to maintain the property.

3. refi - if you have lots of equity in the place (sounds like you might) and you want to lock in a longer term mortgage (again, sounds like you might due to ARM coming due) then I say go for it. This will yield many benefits. 1. you could pull cash out of the property and invest in more property or that S&P fund. 2. your rate will be fixed

I personally always finance 30 year notes when I can instead of 15 because I figure with a 30 I have the lowest payment and I can ALWAYS pay on a 15 year schedule when times are good and pull back when times aren't (i.e. pay extra principal every month to put yourself on that 15 year schedule when you are rented but then make the minimum payment when its not)

You have lots of options and are definitely looking at it the right way.  If you like the homes and they are producing then keep them, refi them and enjoy.

b