All Forum Posts by: Seth McGathey

@Jaycee Greene yes they did discuss it being cross-collateralized. I just was wondering what the pros/cons would be in going this route. 

@Jaycee Greene no, this is talking about small local banks being willing to use the equity of one property as collateral in place of your down payment on another property. They repeatedly stated that it is only something small local banks will be willing to do. And only if you have a track rectors of making good investments. Which I meet that criteria, so I am highly interested. 

In a recent BP podcast they discussed using your equity as collateral for your down payment instead of actually paying it. Does anyone have more info on this? What requirements are there normally? Is there any cons to doing this rather than a HELOC or cash out refinance? Would love to just dive deep into this concept.

Two rules I try to live by as an investor. 

1. Any property that breaks even or cash flows today is a great investment 10 years from now. So it is always the right time to buy.

2. If you can BRRRR successfully then do it. The only time not to BRRRR is if you are not trying to build a portfolio right now. Most other strategies are either going to force you to wait until you save up again or provide you some other benefit besides long term profits. (For example a straight flip won't get you longterm wealth but will get you quick cash for a future deal).

@Mark Nashed why not do that? 

@Harry Cuper couple things come to mind.
Do you have debt? If so, pay it down as fast as you can.

Do you have good credit? If not, start working to fix that. 

Why don't you have money to invest? Could you start saving some? Because if it's your first property and you are willing to move into it, you can put 3.5-5% down. Which is likely going to be the fastest and easiest way to get into a property. 

But like Drago said, finding good deals is your other option. And the best way to get good at finding deals is practicing. Start looking at every property in your buy box and run the numbers. Find out what the cashflow would be, what you think appreciation will be, what amount of fixes or improvements are needed, what the AFV would be after your fixes/improvements. Keep doing this until you can guesstimate if a deal is good or not just by looking at it. Then run the numbers for real only in the ones that seem good at first glance. 

And finally, find people who can help you. Find an agent who is investor friendly and ideally invest themselves. Start going to some local investor meetups and start networking and learning there. 

Good luck!

My understanding is you can actually be a property manager. But some things are off limits without your real estate license. For example you can not collect the rents for them. 

Simple answer is that if there is a nuclear war, your only worry at that point is going to be survival. Most likely the bank won't even exist anymore to collect a mortgage. And if it does, the government is not going to be worried about in forcing mortgages, it will be worried about war, rebuilding, and regaining order. Most property rights will be dealt with years later, if ever. And almost impossible to make claim to. 

War without nukes is the same. But if your properties are in the U.S., then you are not going to have to worry about a small war. Only a massive world war, because nobody is successfully invading the U.S. unless we have been in a massive world war for years. 

@Steve Bob if I were you my next step would be listen to the Bigger Pockets podcast for a few weeks. There is nothing wrong with being new and taking your time to make sure you know what you are getting into. Your questions lead me to believe you have the drive and intelligence to do this and just are lacking the knowledge. So first step is dig deep into the knowledge. 

A single family is fine, but keep in mind you limit your cashflow capabilities. This being said as someone who's first property was a single family that has been very profitable for me. But I probably could have made way more if I had bought a multi family. 

I can't speak to your market because I am in Milwaukee. But I suggest if you want to go local (which I think is a good idea) I recommend house hacking. If you are not going local, I suggest going somewhere cheaper like the Midwest. 

As others have stated, appreciation is not going to be worth it in 1 year. Average appreciation is 3% annually. So if you buy a $100,000 property outright, and get that $3000 appreciation. My guess is you are going to spend that in repairs or vacancy. Usually if you want to immediately turn around and get a new property within a year of a purchase, you need to put some money into fixing the place up/adding something to it. Usually adding an extra bedroom or unit. Thats the quickest way to get your money back out of it. But generally if you want to get the most bang for your buck, you want to use leverage. For example, if you buy a $100,000 house cash. Let’s say you can rent it out for $1000 a month. In 100 months you will have made your money back off rent plus gain any appreciation over that 8 years. If instead you put that same $100,000 down on a bigger property, at 20% down you could buy a $500,000 property. Likely you can get a decent 4 plex for that. Renting each one out for $1000. So now you are getting $4000 a month. Yea, you have to pay the mortgage and interest payments, but you are still transacting $4000 a month on a $100,000 investment instead of $1000 a month on a $100,000 investment. And if you want to leverage further, you could do what others mentioned, which is house hack. Where you buy that 4 plex and live in one unit. Now you can put as low as 3.5-5% down. So you can put just $25,000 down. And all of that to say you still get the appreciation, so you are appreciating $15,000 per year at 3% rather than that $3000 a year. You can see how much faster you are growing your money that way. Now take all those numbers with a grain of salt. You do have to factor in capex, insurance, closing costs, and all the other expenses. But the general idea is the same. The less you can get lenders to allow you to put down on the property, generally, the more profitable you can make the property long term. Usually the only reason people pay cash for a property outright is if they are looking for immediate cashflow rather than longterm profits.