All Forum Posts by: Shane Elias-Calles

Quote from @Bill B.:

You're actually doubling your ROE which is a much more important ratio than COC.

COC should be infinite after a long enough ownership or a cash out refi. ROE shows the 4% going to 8% return difference you'll make by upgrading properties. Your COC for the new property would be 8% (the same as ROE year 1 assuming you paid market price.) but your old COC was probably 12% or higher. ($10k return on $80k downpayment). I still prefer property 2 because it generates a higher ROE and a higher net income.

 Very much agree! I appreciate the wisdom shared here Bill! 

Quote from @Logan Singleton:

Hi Shane, I work with a lender that will allow for a second position DSCR loan. So you can preserve your low rate in the first position. Please let me know if you're interested in learning more.

 Logan, would love to learn more about this, I will send you a pm

Quote from @Bill B.:

You forgot to tell us what property #1 was worth, $250k equity out of $300k or $900k makes a big difference in the value of the cheap mortgage.

But…in reality with property #1 you have $250k invested making less than $10k per year so less than 4%. You could sell and put the money in a guaranteed CD at the bank and earn more. With property #2 you’ll have less than $250k (because of selling and buying costs.) making $20k, closer to 8% return. If you can’t swing property #2 without selling property #1 you sell property #1.

The only downside would be in an economic slowdown the cheaper home is probably easier to rent out. But the counter argument would be the person who can afford the higher rent MIGHT be less likely to be affected by a slowdown. 

@Bill B., thanks for the insight, My mind is in a very similar position. From a cash on cash perspective  the CD comparison makes sense but with the other tax benefits, loan pay down etc, my personal belief is that the RE return still exceeds the CD returns. 

when it come to not swinging for property #2 that is the case.. for now... either way long term I feel as though trading up a 400k asset for a million dollar asset, with the same cash on cash returns makes sense despite the interest rate. Thank you for commenting! 

Quote from @Darius Wade:

Quote from @Shane Elias-Calles:

Hey BP,

If you had a single family rental with 250k worth of equity in it with a 2.625% interest rate, and about 800 a month in cashflow, would you trade it up for a 1 mil dollar property at 8% interest rate and 1600 worth of cashflow?

Or would you use a HELOC on the current property and use the equity to purchase another?

Thanks

Shane

 That definitely is challenging having the prospect of losing such an ideal interest rate. I guess my question would be with 250K equity how close are you to paying off the house. If you are close then my thought would be to aggressively pay down the mortgage on the current property. It will likely continue to appreciate and by owning it free and clear should get you closer to the $1,600 from the larger investment. This way you can lower your debt to income and while paying down the mortgage still enjoy the low rates. I hope this helps.

Thanks I appreciate the Insight, the house is worth roughly 450, and I owe roughly 200k, just for numbers so paying it off even aggressively would not be an overnight deal, i am close to having enough of a down for another larger property as well. From all this feedback it sounds like i need to decide if my goal is to scale quickly by trading up or playing the one at a time pay off each house strategy. tough choices! 

@Denver McClure I appreciate that very much, I have a great LTR Prop Manager in the area I have checked with as well! Thank you very much i will reach out to @Harrison sharp!

Hello BP! 

Looking for some refferals for prop managers that deal in the mid term space in the Fort Worth area! Thanks in Advance!

@Brittany Minocchi Thank you for the response, yes i am working on finding something and the blended rate is still much better than a refi, i am stuck with equity on a couple of properties that i would love to unleash! Lol

Hey BP,

If you had a single family rental with 250k worth of equity in it with a 2.625% interest rate, and about 800 a month in cashflow, would you trade it up for a 1 mil dollar property at 8% interest rate and 1600 worth of cashflow?

Or would you use a HELOC on the current property and use the equity to purchase another?

Thanks

Shane

Thanks, everyone! I appreciate all of the insights. 

I have enough on a current line of credit that I have on another rental to fund another down payment. in the area. and yes I have a great team there. 

I am looking at it as a portfolio question. The current rental that hast he heloc on it cashflows enough to cover the additional interest payment on the line, so in my mind if the two properties together cover both mortgages and the LOC payment, with comfortable cashflow left over it may be worth doing

Hello BP,

Does anyone have experience using a fixed rate home equity loan on a primary residence to purchase more property? If so does anyone have an opinion on the risk reward of this strategy? 

Would it be worth  taking the fixed rate loan and buying an out of state property with that cash assuming it would fund the whole purchase? 

Thanks

Shane