All Forum Posts by: Dan Schwartz

@Andrew Dennis Ortiz since you own only three properties total, PenFed Credit Union can issue ELOCs on your investment properties. Once you get the fourth property, they will not write anything except a HELOC on the primary (which they will do regardless of the number of properties owned). Verify this with them, as things change.

The bigger issue may be that you have only 20% equity in the investment homes. While that's a great position in general, I don't know of any bank that will write a line for greater than 80% LTV. Many are even lower than 80%; Bank of the West used to be 65% LTV when they wrote lines on investment properties.

We don’t know your complete numbers, and that’s OK.  I would call PenFed and talk through what they can do for your investment properties. 

If that doesn’t work, you may need to look at private money or even credit cards….but then your exit strategy to pay off the debt becomes supremely important (vs a line of credit that you could carry at low cost for a while).  

Good luck!

As an investor, I chuckle at them.  If it’s at all effective (I have no clue whether it is or isn’t), then it’s likely to be effective for finding motivated and distressed sellers, not investment buyers.  You need a different way to build your buyers list.  

+1 on AZREIA.  We went nearly every month when we started out and it was an amazing font of information.  I hope the same guy (Alan?) is still giving the monthly market reports.  He was great.  Good luck!

@Nneka Keshi talk to a lender about the mechanics of doing a cash out refi whose proceeds will be used as the down payment on a new purchase. This can be done with conventional mortgages; you just need to find the right loan officer to handle it.  In this scenario, you don’t need to unlock the equity until you are ready to redeploy it.  

The concept of "infinity cash on cash" is fun to think about, but once you intermingle equity like this, I find it's more important to look at the metrics globally. That is, what is my total cash flow with the two properties vs the one property? What is the principal pay down on the two properties vs the one property? What is the expected appreciation, on two vs one? What is the IRR on two vs one, etc.?

Well, you have 

No, unless you are a real estate professional.

And

Yes, if you are a real estate professional.  

So

Are you a real estate professional?

No.

There's a few thousand more words that can be written to cover all scenarios, but the answer is basically no.

High income individuals who are not real estate professionals need to understand that the act of owning real estate doesn't in and of itself lower your taxes.

It allows you to earn more income that is taxed at a far lower rate than your W-2 income.  Which is a great benefit.

But it doesn't affect the taxes you pay on your W-2 income.

With thousands of words of exceptions, which someone else can write out.

So let me get this straight, rather than deduct repairs from a security deposit, write on a piece of paper what the deductions were, do some simple subtraction, pay 0.01% interest on the deposit held, and settle this all within 45 days (we have 14 in AZ!), you guys would rather go through the time and expensive of suing (or threatening to sue) every tenant that moves out of one of your properties.  

Boy, you guys are really “sticking it to the man,” aren’t you?

@Tony Antonelli a conventional cash out refi costs as little as .375 pts more than the purchase money loan.  It depends on the size of the loan, and how your lender handles it.  But that’s $375 per $100K of loan, which is a pretty insignificant cost if you are able to get much better deals by initially paying cash.  

This is based on my experience cashing out an investment property. Mine wasn’t a “delayed financing” loan, which may be what you would be doing. 

Talk to some lenders and get their hard numbers.  Good luck!

@Dan Marl

@Dan Marl most, if not all, brokerages will offer margin loan using your portfolio as collateral.  It’s not hugely different than your cash out loan: your asset is valued, then the bank (brokerage) will loan you a certain percentage of that value and hold your asset as collateral.  A major difference is that the brokerage will liquidate your asset (or ask you to post more collateral) if the value falls too much.  

Walk before you run. Of the two options (cash out refi and margin loan), the cash out refi is far more stable and secure.  I’d start there.  You understand the mechanism, and have said that you can afford the higher payment. 

When you are ready to take a step after that, consider tapping your taxable portfolio via a margin loan.  You’d probably be able to get a loan equal to at least 65% of your portfolio, but it all depends on your specific holdings.  The concept is simple (see the above comparison to a cash out refi), but the calculations can be complex.  Learn more about it wherever you currently hold your portfolio, and then you also might look at Interactive Brokers, which has interest rates in the low 1.00s for portfolios of your size.  

Good luck!

Many post offices are now offering street addresses.  And they accept packages from FedEx, etc, unlike before.  My USPS box is 25% the cost of my local UPS Store.