All Forum Posts by: CK Hwang

Thanks Albert, ok, I ran the numbers assuming a 30% drop in rental, and the rental returns still covers the PITI, so you think I can assume this to be a "safe" amount of equity to pull out? Is there a figure you use for your simulations?

One way to be bankrupt using leverage is by buying the wrong properties or negative cashflow properties and you hope the property will appreciate.

Another way that people get into trouble is by buying a turnaround property or repositioning deal. This means the property has negative cashflow in the beginning, and then you used leverage to finance the deal and the repairs...but you can easily run out of cash to pay back the debt (and the repairs) because turnarounds can take twice as long and twice as expensive as one can estimate.

Wendell, thanks for your input. For these scenarios you speak of, do they tend to apply more to buy and hold / multi families... or to phrase the question differently, is there a investment type or scenarios that this problem arises?

Hey Albert, thanks for the advice, I had a question though. As far as stress tests goes, how does one determine the stress test figures. i.e., stress test if rents go down 90%? If RE market collapses and prices plunge 90%. If so then no amount of leverage would work. What kind of numbers are you working with for a stress test Albert?

For myself, in addition to how much it costs to repair and how much profits, I'm also looking at

1. location. Good and easy to move or bad neighborhood and sitting for awhile?

2. Neighborhood reputation for quality of land or construction. Where i am, some neighborhoods have reputation for landslides, so I tend to stay away from them. Some neighborhoods around me have a reputation for slab leaks because of shortcuts the builders took in the 80s, so I know I need to budget for repiping and slab repair.

3. Title. Is it clean and easy to transfer.

4. Delivered empty or tenanted?

5. Architecture. Some homes are just really really ugly, not in the fixer upper sense, but just some awful 1970s design that would cost a fortune to rectify. Homes like these will sell, but they will tend to sit longer. Also, weird architectural features, like the house being extremely skinny or too few bathrooms, etc.

Hi everyone, so this question might come across a little strange, so I thought I would first give some background information. So as things go, my little fix and flip business is starting to grow and I am starting to think about borrowing against my rental property to fund more flips. I have always been a super conservative investor, only borrowing up to 30% of valuation on one property, and my other properties are paid off in cash.

Now I know to grow my business I need to probably be less conservative, at least for a few years, but before I dive into the big big scary world of leverage, I wanted to see if you guys could perhaps tell me how most investors you have heard of or know get into trouble using leverage.

I'm not talking about people who pull out equity to fund vacations, nice boats and cars etc, but rather how do people get themselves in trouble when they reinvest the money in real estate or otherwise.

The reason I'm asking this question phrased this way is because I've heard the success stories of people who leveraged to the hilt and came away winners (i.e. Donald Trump), but I want to learn the lessons of those who failed or almost failed as well. Stories or advice anyone?

Hey everyone, in the last few days I've been looking at getting a HELOC to fund a few deals coming up and I've talked to mortgage brokers at a few big banks like wells fargo and chase.

The HELOC products are pretty much the same, fees are pretty much the same + or - $100, as are the terms interests all around the 4% mark, almost to the point where all these banks seem like pretty much the same company.

In such a situation is there anything I should look out for? Is one bank better than another? Any perks or benefits to going with one of the big names? Or should I just pick the banks that I like the best?

This is my first time getting a HELOC so apologies in advance if the question seems silly.

Hey everyone, we recently purchased a fixer upper with a swimming pool. The pool is fine, works and is filled and useable. Crazy enough, this is the first time I've ever dealt with a flip where the pool isn't leaking or needs to be drained.

As such I needed some advice on what to do safety wise during the month that the house is being rehabbed. The pool is located in the backyard which can only be accessed via a side gate, but the pool isn't fenced off within the yard. My fear of course is some neighborhood kid scaling the fence and drowning in the pool. Any safety recommendation is great appreciated.

So just for fun, I decided to email an escrow company that i use on almost all my sale to get their take on a double close and this is their response.

I have heard of this, however we cannot do that as one cannot sell a property or go into a legal binding contract on a home they do not already own. The reason it’s risky is because your name isn’t on title as the owner and for you to turn around and sign a contract stating that you have the ability to sell this home isn’t correct because technically you do not own the home and do not have rights to sell it. We’ve been approached for a transaction like this before and our office will not take on that liability. You would have to purchase the home then sign a contract with the new buyers from you to them. The contract should be dated after the closing of your home to you as the owner.

Hi Jonathan,

To answer your question, some escrow companies can handle something called a double closing in which you close on the property but your buyer also close at the same time, sellers gets paid, buyer gets property in his/her name. Many escrow companies have never done it before, so it can be a hit or miss depending on the escrow company. Or in Florida, I believe they use RE attorneys to handle closing not 100% sure. Either way, if you're not a US tax entity, being Canadian, the need to declare and the escrow company having to carry out tax withholding might make it very difficult to do a double closing.

As far as having your buyer step in to assume the contract at the last minute, I don't know for sure, but from my personal experience buying, it depends on the seller. Some direct sellers/homeowners will be ok, some not (they find it shady). I am pretty dang certain the few short sales I have purchased the banks would not have been ok with it because I had asked if i could close in my personal name after starting the paperwork in an LLC, and basically it had to go through the whole chain of command again to get approval from every lender involved to change the name again at closing time.