All Forum Posts by: Justin B.

I'd go with a long term fixed anytime you are able. I invest with others in an LLC so long term fixed loans aren't really an option for me, but if you have the ability to do so, I'd do it. Even at 5%, that's a historically low rate. I know we've been as low as 3.5% in the recent past, but let's be honest. The most likely scenario is that rates will continue to go up. Speculating on how fast or how far is anyone's guess, but lock in what you can as low as you can for as long as you can. 5 years from now we may be hearing people talking about how they got an awesome 10% rate on their rental property :).

First, I'll say that anyone who says a bank won't finance a property of that size is incorrect or is just speaking too generally.  I've financed at least 7 properties of that size and as low as $20k.

Second, it could be "harder" to find a bank the lower the loan you need depending on the area.  It probably depends on what the median home price is in the area.  Where I invest, the median home price is probably $50-$100k depending on how wide the net is cast.  So a $54k home with a ~$40k loan is easy to do (I'm referring to Mississippi and Memphis, TN btw).

Third, Never base anything you do off what one person says.  The agent may be speaking generally or it could be because of the size he just wants a quick close without a bank being involved.  Until you've talked to 10 different banks and had every single one of them tell you they won't finance it because it's too low, keeping going to banks and asking.  I can all but guarantee you'll find one.  Focus on the smaller banks.  If you're at the regional or national level, yea, you will probably have problems.  Local and state banks are the way to go.

If you're trying to buy a $54k home where the median home price is $400k, you will have some challenges, but if you are trying to do that, I think you're in the wrong place anyway.

For most folks, I would say very bad idea.  This is bigger pockets so most of the folks here are here because they are already more responsible than most when it comes to CC's.  Notice I said most, not all :).

I would say it's a bad idea if you have no other alternative for the money.  Then it becomes risky and I wouldn't do it.

If you have the money otherwise and want to take advantage of a 0% rate for 6 months or something like that, I say why not.  It's just a strategy at that point.  They key here is that you are aware of all the pitfalls, can have it paid off in time with no issue, and won't get stuck without being able to pay it back or potentially having to pay interest at a super high rate.  Credit cards can be a great tool when used correctly.  For me, I use my credit cards (I have 2) all the time.  I pay them off in full every month and have never paid a cent of interest in my life.  I've gotten tons of points along the way, taken free trips, etc.  That's how you use credit cards.  I would never put anything on a credit card you can't strike a check for right there and then.

Hope that helps!

 Yep, I don't always read all the previous replies prior to posting.  I feel it keep my influence to a minimum on what I post.  But that's exactly what it is.

Here is what I would do as I have a very similar situation as well.  Having just bought it, your loan is based on the purchase price.  If you have the cash, I'd certainly do whatever you can to increase the income.  At some point down the road (6 months, 2 years, whatever), I'd refinance and take out what I've put in.  Again, anything you do needs to be able to increase rents or decrease expenses.  If you can do that, you are all but guaranteed a higher appraisal.  Then you have a property with $0 in it and use that money to amass more property.

I just bought mine and the appraisal was 25% higher than the purchase price.  We have a plan in place to put some money (5-7% of the purchase price) into it (mainly cosmetic items) to be able to drive higher rents in about a year.  Once we have done that, we plan to refinance, pull out what we put in (down payment + renovations) and have it cash flow and move on to the next.  Fortunately, the appraisal price NOW is where it would need to be to do that, so I really don't have to have any (or much depending on the amount of money we wind up putting into it) increase in the appraisal price to do what I need to do, but I think that's more of a rare situation.  We found a motivated seller and we could close quickly.

Good luck.  Sounds like you found a great deal!

I have this same situation.  I put every penny back into buying more property.  I haven't taken a cent from my business yet.  It's the sole reason why I've been able to amass the portfolio I have.  I also have the luxury of not needing the income.  At some point, I'm going to look at the cash and say "Ok, I can take some and still have plenty to continuing growing at a good pace".  Where exactly that is, I don't know yet.  I figured I'll know when I get there.  At some point, I'll also have the option to just stop buying property and sit on a beach or play golf all day.  Again, that point isn't clear to me yet, but at some point, it will be.  Once the kids are completely out of daycare, the light gets much brighter :).

Touché, Roy!

When you see that calculator that was posted and know it's bass-ackwards.  Having to press the enter key, enter your second number, then the + sign.  WTF? :)

It's all good Paul.  I wasn't being hard on ya :).

ahh, gotchya, makes sense now.  Misread it.

My second point still stands though.  Regardless of what people have said is "possible", not taking depreciation and trying something "fancy" to not have to pay taxes on the IRS expectation of you haven taken it is not something you want to do (at least I don't) :).