All Forum Posts by: Slade Harrison

Originally posted by @David Cornett:

@Slade Harrison curious what your ultimate move was, and how it worked out?

 Hey David, I actually took out a 401k loan with the intention of paying it back using my heloc... haven't done it yet, Because now I'm looking to Maybe use my heloc to purchase another property...

Originally posted by @Corby Goade:

HELOC every time. Just make sure your purchase is a good enough deal that you can refi in less than a year and pay off the HELOC. Good luck!

@Corby Goade I am in the same situation as the OP. I have a HELOC available to use for my down payment. Should I let the bank know that is where I plan on obtaining funds for my down payment or should I go ahead and pull out the amount and put in my bank account before applying for financing ? My fear with doing the latter is the fact that a HELOC is looked at like any other revolving line of credit and that would badly impact my DTI...any thoughts?

@Jason DiClemente Thanks for the information, I'll definitely do that. Is it possible to roll closing costs in the loan? I realize I'd be financing the closing costs but I'd rather keep as much cash as possible...

Originally posted by @Jason D.:

@Slade Harrison it sounds like an average, low doc, investment property loan. There are lots of lenders that do these so I would just make sure you aren't paying a ton of points and that the fees are in line with other lenders.

 Talked to the Loan officer late yesterday afternoon and indeed they include 3 points on top of closing. He estimated closing around $8k on a $90k loan...I think I'll shop around a bit. 

So I am searching for financing for a Duplex i am interested in and found Luxury Mortgage. They have an "Investor Cash flow" mortgage where they basically use the cash flow from the investment property, your credit score, and proof of down payment (at least 20%) to qualify you for the loan. I easily qualify for the loan, have the funds available for the down payment, and an 840 credit score and am wondering what the catch is because it sounds too good to be true. 

All in all, they offer multiple fixed rate loans, up to 30 year and ARM's, BUT at about 1% higher than today's rate...Every other lender i have spoke with wants at least 25% down, and at around 5.25-5.5%.

Has anyone used them before? I am wondering if they try to gouge you at closing? Thanks, 

@Ryan Beasley That's what I was thinking in the beginning but kept seeing other calculations adding in other costs.

Kind of new to REI and Bigger Pockets. I own a SFR that used to be my primary but has been rented for 2 years now. I am looking to purchase my second investment property and have done the other basic calculations that BP recommends, but am having difficulty in figuring out how to calculate the Cash on Cash return. To me it looks like you have to add in hypothetical numbers (estimated monthly repair costs, vacancy rate, etc..). Is that correct?

Here are the properties that have interested me (not sure if either are section 8):

Duplex built in 2002 consisting of 3/2 1050sq/ft each for $94,900

Currently both units occupied with $670/month leases (not sure of the lease terms).

New roof in 2015, new Central A/C units in 2013 and 2015.

Outside looks good, inside looks clean with decent kitchens (basic L shaped) with laminate counters, tile floor in kitchens, what looks to be berber carpeting everywhere else. Overall looks good in pictures. 

Financials: 

List Price: $129,900 

20% down: $25,980

Financing: $108,420

Closing cost: EST. $5000

Total investment: $30,480

Mortgage payment: $530/month (Conventional 30yr at 4.6%)

Annual rental income: $21,000

Annual Expenses:  

Property tax  $1200 (verified through property appraiser website)

Insurance $1,200 (best guess)

Prop man.$1,680 (8% of rent)

Mortgage $6,360

Calculations:

NOI = Income (minus vacancy)- Expenses (Prop tax, insur, and Prop mgt)

        = 21,000- 4,080 

         = $16,920

Cash Flow = NOI - Debt service (mortgage)

                  = 16,920 - 6,360

                  = $10,560

ROI = Cash flow/ Investment basis

       = $10,560/ $30,480

       = 34.6%

Cap rate = NOI/ Purchase price

                = 16,920 / 129,900

                = 13.0%

 Cash on cash = ???

2nd Option: 

Quad-Plex built in 1981, doesnt say if any improvements have been made (at least on the MLS page)

All units are 2/1 about 970 sq/ft each . Tenants pay electricity, not sure about water and i believe there would be a dumpster unit rental every month (there are other quad plexes on the same street)

2 units rent for $450 each

2 units rent for $425 each

Total rent income: $1750

No pictures are listed, and will only let you view inside if offer is made.

Financials:

25% down: $25,980

Financing: 108,420

Closing cost: EST. $5000

Total investment: $30,480

Mortgage payment: $530/month (Conventional 30yr at 4.6%)

Annual rental income: $21,000

Annual Expenses:

Property tax $1200 estimated

Insurance $1,200 (best guess)

Prop man.$1680 (8% of rent)

Mortgage $6360

Calculations:

NOI = Income (minus vacancy)- Expenses (Prop tax, insur, and Prop mgt)

= 21,000- 4,080

= $16,920

Cash Flow = NOI - Debt service (mortgage)

= 16,920 - 6,360

= $10,560

ROI = Cash flow/ Investment basis

= $10,560/ $30,480

= 34.6%

Cap rate = NOI/ Purchase price

= 16,920 / 129,900

= 13.0%

I realize i forgot to add vacancy rate to the duplex. 

Do my calculations look right? The quadplex looks to be in good shape, at least from the outside. 

For the COC, i'm assuming what i am missing is adding in the cost of possibly a water bill, dumpster rental, and a monthly estimated "repair" cost?

Any help/advice will be greatly appreciated.