All Forum Posts by: Scott Po

Why does every question get "answered" with more questions around here haha. It's somewhat frustrating sometimes. This isn't hard to answer, most first time investors are looking for cashflow to make all future real estate investing ventures happen. Nobody is buying their first property for appreciation. 

That being said, if I had 100k I'd finance a below market triplex/quadplex in a cheap but good cashflowing market and renovate it using the 100k to get equity and cashflow. 

I would only do Airbnb if I were an established investor that could survive if it failed. The Airbnb market isn't what it used to be. So I wouldn't bank on it for my initial venture. If you fail, you're back at zero. Whereas if you get a nice cashflowing multifamily, you're safer and your initial investment is making you money to put towards other future ventures. 

Also, you’re recycling this loan, putting your name on it instead of the sellers. The lender does not create a whole new loan or anything. Doing that would void the current mortgage leaving you with a current market interest rate. It’s literally slapping your name on the mortgage over the seller’s. If any other loan terms change, you’re getting a new mortgage. You don’t want that, you want the old mortgage and its terms (theoretically)

Quote from @Luis Herna:

Quote from @Scott Po:

I just did an assumable loan. Still not quite sure what your deal info is but from what I can tell you, you will have to come up with the assumption gap (cash/finance). You will get their interest/equity. It took me about 4 months for the paperwork to go through. Mine was just a single family home also. 

But why assumption gap if the property has 30% equity? They usually lend 80 to 95% LTV. By the way, if the seller already has equity of 30% then the new refinance loan should be lower than the initial loan.

Sure thing, you’re taking over a mortgage from years ago. Since it was from years ago, the property likely has appreciated. So, you’ll assume the old mortgage but you’ll also have to come up with that difference between old mortgage value and current market value, this is the gap. 
In addition, you’ll have to pay the seller out of their equity as well. Is it a VA assumption?
I’m not sure your cash reserves but targeting 2020 to 2022 is the best strategy because there’s likely 0 equity in those and they typically haven’t appreciated enough to have to finance a second line of credit. 

Quote from @Luis Herna:

Quote from @Scott Po:

I just did an assumable loan. Still not quite sure what your deal info is but from what I can tell you, you will have to come up with the assumption gap (cash/finance). You will get their interest/equity. It took me about 4 months for the paperwork to go through. Mine was just a single family home also. 

 Ok I see, But assumable loans means the same interest rate will stay the same?

Yes. Think of it as the govt forcing the lender to take whiteout and use it on all the property documents, whiting out the sellers name and writing in yours instead. Just mind the gap. The assumption gap that is. 

Ah a good old philosophical question on BP, I love to see it. Well, I’d say that the free market is the most moral vehicle humanity has had in our history. Because of the free market, there are countless opportunities for people to get jobs or housing. You upgrading the property, thus increasing the value which in turn could push out the current tenants, contributes to the vitality of that free market, a market that gives the tenants alternative options. 
They have options because of the free market…..and there’s a free market because of choices like the one you are currently contemplating. So while it might seem immoral to push them out, your action supports the system that has lifted more people out of poverty at a rate never seen before in human history. A system that provides them with options that otherwise would not be there.

I just did an assumable loan. Still not quite sure what your deal info is but from what I can tell you, you will have to come up with the assumption gap (cash/finance). You will get their interest/equity. It took me about 4 months for the paperwork to go through. Mine was just a single family home also. 

I just bought my first property. I was given some advice to put the property under an LLC out of Wyoming as a liability precaution. Anyone hear about this? Pros vs cons? Thanks

Thanks William, this helped out a lot. There are no comps in my market that would afford me the same return if I were to go the VA route. Given that, I think I will be staying in the deal. My W2 is good enough that I can rely on that if I should need to cover anything drastic. Thanks again.

Quote from @Joe Villeneuve:

Quote from @Scott Po:

Quote from @Joe Villeneuve:

Quote from @Scott Po:

I have a leverage question, would you spend $90k to get a property with a $1300 mortgage when comps in the market would be closer to $2200?

If I go VA, I could get a similar property for no money down but have that $2200 mortgage. Or I go $90k down and get a $1300 mortgage.

The numbers you have listed are disconnected from eachother.  What would the cash flow be if you used $90k on a down payments.

If I stayed in the deal by putting down that 90k, I'd have a 1900 mortgage. I'd be able to rent the house for 2400-2800. So the cashflow would be 500 minimum. 

If I bought a comp without going the assumption route, my monthly mortgage would be around 2800. I was just reluctant to go all in with my 90k but it would be a good ROI

So far you're missing way too much info to answer your question. You need to know the following:
1 what the purchase price is.
2 what the rent is
3 what the monthly taxes and insurance payments are
4 what the mortgage payments would be based on 90k down payment
5 what the mortgage pmt would be if you put 20% down instead of 90k
...then, and only then, can you answer your question

 Joe, I've said most of this already but;

1- Purchase Price is 407500

2- Rent will be 2400 to 2800

3- Mortgage with PITI is 1900

4- Mortgage without PITI will be 1300

5- This isn't an option because it's an assumption. 

Thanks again

Quote from @Joe Villeneuve:

Quote from @Scott Po:

I have a leverage question, would you spend $90k to get a property with a $1300 mortgage when comps in the market would be closer to $2200?

If I go VA, I could get a similar property for no money down but have that $2200 mortgage. Or I go $90k down and get a $1300 mortgage.

The numbers you have listed are disconnected from eachother.  What would the cash flow be if you used $90k on a down payments.

If I stayed in the deal by putting down that 90k, I'd have a 1900 mortgage. I'd be able to rent the house for 2400-2800. So the cashflow would be 500 minimum. 

If I bought a comp without going the assumption route, my monthly mortgage would be around 2800. I was just reluctant to go all in with my 90k but it would be a good ROI