All Forum Posts by: Takahito Torimoto

Any recommendations on who to go to for a cash-out refinance on an investment property, and a HELOC on an investment property? So far I've always gone to Better.com for all my loan needs but this time I feel like I should do more comparisons from other experts here.

Thanks in advance!

-Taka

Yes I would be eyeing a STR cabin rental or two in the Northwest GA mountains area (where I self-manage); I personally like the cabins that are $300-450k. The one I did a 1031 into last year was at $375k - BUT I did put ALL my previous equity ($200k) into that single property (instead of getting multiple units in the 1031), which probably lowered my ROI - but (in amateurish fashion) I looked at it as not changing my out-of-pocket and converting my $100/mo LTR to a $2000/mo STR. It was also my first 1031 Exchange so I was trying to be super cautious and do it right. I'm sure I could have done better if I had gotten 2-3 STRs instead but as you know the market has been crazy and it's been difficult to buy (properties being sold in 1-2 days after listing, multiple cash offers, etc).

I did think about taking out less than $100k cash-out and at least breaking even on the 1st property with cash flow, but it probably does seem better to just sell it and take the complete equity towards 1-2 STRs in a 1031 to get a much bigger cash flow.

 True - I guess having a negative cash-flowing property devaluates the other investments.  A part of me is thinking that there will be very good appreciation because of the area, and rent is also looking to go up with it - at least for the next few years.

At $600/month (market) cash flow, I think it's a good rental (my other properties are cash flowing $200-600/mo but they don't have much equity) but doing a 1031 into a higher-return STR might be a better option just because it has the equity; I did a 1031 last year on a similar "high appreciation but low cash flow" property and went from a $100/month cash flow LTR to a $2000/mo cash flow STR.

I'm still trying to grasp when "it makes sense" to do a cash-out refinance of an investment property to get another.  It seems it's more for when the interest rate is lowered enough to minimize the loss in cash flow on the 1st property?  All of my investment property loans are 3-4% unfortunately - and most of them I purchased in the last 1.5 years.

TL;DR: A cash-out refinance will make my original property negative cash flow of $250, but my use of that cash (either in the "holding" investment or the eventual STR property to put a down payment on) should more than cover for the shortfall.

I am considering doing a cash-out refinance on one of my rental properties - so that I have cash ready for my next property.

• Market Value: 320k
• Remaining principal: 96k
• Current Monthly Cash Flow: $300

(I have not raised the rent enough to current Market rate which would make it cash flow $600; I plan on replacing the tenant next summer to get market rate)

If I were to do a cash-out refinance today (max of $144k), my P&I will go from $560 (3.75%) to about $1100 (3.5 - 4%) giving me about $250 negative cash flow (Market rent would give me a positive cash flow of $50/month)

Would it still make sense, if I am able to put that $144k immediately into a "holding" investment with 7%+ CoC returns (approx $800-900/month cash flow) until I can use it for a STR property with higher returns?

My other option is to sell the property and do a 1031 but I'm trying to learn/understand the benefits of cash-out refinancing for scaling up the number of properties.

My understanding is: a cash-out refinance can (and in my case, will) lower the cash flow on the 1st property if the interest rate is not significantly lower, but if using that cash to purchase a 2nd property where the TOTAL cash flow between the 2 properties is greater, then it makes sense. Am I correct?

(I am also thinking of eventually getting a HELOC on my primary residence, but my understanding is that it's a terrible way to use as a down-payment since the interest is high, unless it can be paid off quickly like in a BRRRR)

Hi everyone! As I sit here stupidly trying to do my 2020 taxes myself at 3am, I'm at a point where I realized I should be using a CPA that has experience in Real Estate investments. I now have 7 LTRs and 1 STR; 4 LTRs were purchased a year ago, and the 1 STR was purchased this year using a 1031 from a LTR sale late last year. As much as I've enjoyed doing (most of my) taxes, I'm way over my head now :-) and I have other things I should be doing instead!

I do prefer someone who is somewhat local - so can anyone recommend me someone in metro Atlanta, preferably in Northern or North-West Atlanta?  (I'm in Kennesaw but my properties are scattered mostly through North Georgia)

Thanks in advance!

-Taka

My tenant just sent me their "Declaration under Penalty of Perjury for the CDC’s Temporary Halt in Evictions".They moved in Aug 1. They have not paid rent for Sept, Oct, and now Nov.

Separate from the fact that I am an IDIOT for "being nice" to the tenant and her family, and trusting the tenant's word that "the money is coming" - what are my options?

The tenant had mentioned:

1. [Sept 16] She was waiting on COIVID partial unemployment payment from the 3 weeks she was out of work
2. [Oct 8] She can "give (me) a little every Friday" (have gotten $0 since)
3. [Oct 9] She "should be able to get caught up" by end of Oct (she said she had some sources of funds she can get access to before the end of the month)
4. [Oct 20] She confirmed she "should still be able to get caught up on rent"
5. [Nov 2] She "has money coming but (she) didn't know when it will be in (her) account" and that "it's processing" and "once (she) has it, (she) will be able to pay all the rent, late fees, and pet deposit."
6. [Nov 3] "Bank is still processing"
7. [Nov 6] "No one can give me an exact time as to when the money will clear my account. It still says processing"; "I'm paying you everything once it clears. Late fees and everything"

On Nov 5, I mailed the tenant an Eviction Notice (Notice to Quit) via Certified Mail.

On Nov 6, I asked her for a screenshot or a group phone call to prove that the funds were still processing - and the tenant has been silent.

On Nov 8, I received a "Declaration under Penalty of Perjury for the CDC’s Temporary Halt in Evictions" from the tenant.

I understand that this CDC Eviction Moratorium requires that the tenant:

1. 1. Used best efforts to obtain all assistance options for rent
2. 2. Earns less than $99k (or $198 for joint)
3. 3. Is unable to pay rent due to substantial loss of household income or medical expenses
4. 4. Using best efforts to make timely partial payments as circumstances may permit
5. 5. If evicted, would become homeless or need to move into a residence shared by other people in close quarters
6. 6. Would still need to comply with other obligations under the lease agreement
7. 7. Would have to pay the balance owed in full at the end of the temporary halt on evictions (currently Dec 31, 2020).

How do I prove that she failed #1 or #4 - especially with what the tenant was telling me above? Can her words be used against her?

I also know #5 is not true - she moved into the property from her mother's house (who lives close by). How could I use this against her? (Technically she should be able to get evicted and move back in with her mother, worst case scenario)

I don't mind the pressure of a 1031 - because I'm thinking I can just find 3-4 "average" (not amazing) deal properties with cash flow, and even that would be significantly better than the not-much-cash-flow state it is in now.

But the question is still - does it seem like a property that I should hold onto for the appreciation based on the data?  My thought is with it not cash flowing much, I'm putting too much risk in the appreciation side of the balance.  (I know that's a personal preference, and so maybe I am answering myself here).

I have an existing rental property that I was/am very close to wanting to sell this summer, do a 1031 Exchange, and get 3-4 other rentals that will have significantly more cash flow.

I understand that there's a range of thought - more cash flow vs more (hold for) appreciation.

With that said, I also know that usually (almost always?) the chance of long-term return is much higher with the appreciation method (assuming the property is in a nice location) - so I realize I am willing to hold it if that is the case with this property.

What I don't know is - how can I do an assessment or calculation (with assumptions of course) to compare whether one makes sense over the other?

I don't have a problem calculating properties for cash flow.  But to see whether the property is good for appreciation, what information is usually used to do any assessment or calculations - so I can compare and make a decision?

Any help (even personal opinions!) would be appreciated - my numbers for this property are here below:

• Market Value $320k; Zillow says the home value will stay the same for the next year though (it has tapered off in the last year)
• Remaining Principal: $110k
• 5BR, 3BA + Basement, 2500 sq ft
• Current Rent: $1950/mo
• Expenses: $1900/mo (5% vacancy rate, estimated expenses, $500 HOA, $4800 in property taxes, $1800 in insurance, $900 P&I included)
• Located in Suwanee, GA:
• Great Schools Rating: 9 (High School), 8 (Middle School), 10 (Elementary School)
• Niche Grade A+; Public Schools A+, Jobs A, Crime/Safety B, Cost of Living C+
• 24% Rent, 76% Own
• #2 Best Public Schools in Georgia
• #5 Best Place to Raise a Family in Georgia

Hey @Riley Schaefer - currently looking "locally" in the Atlanta area.  My mindset (which I think a few might disagree with) is, since I'm still starting out, managing your own properties is good for the experience, and to increase cash flow.  Yes I understand it has risks, but I've (so far) been able to handle (luckily?) 2 properties.  Yes I guess I've had good tenants so far.   In addition, I've been hearing a LOT of horror stories about bad management companies - that there are a LOT.  I have no idea where/how a person would be able to find a property management company that they can trust to do a good job, especially when investing in a non-local market (i.e. I'd love to invest in Florida, but since I'm too far away, I'd be afraid with bad property management companies).

@Marc Brenner Thanks - I will definitely look into it!

Hi @Mitch Messer!  Thank you so much for your answers!  I was nervous and felt guilty afterwards after dumping a whole lot of questions at once (although I was also trying to avoid listing 13 separate questions).

1. I'll have to read up on wholesalers; I assume BP is a good place to find some good ones?

4. I also understand I should be looking at job and population growth... 

9. Wow - are there any tips to be able to find good Inspectors (since it seems, in Georgia, you don't need much to become an Inspector)?  I had been thinking that it might be worthwhile for a (beginner) Investor like myself to learn all the tricks that an Inspector has to know (or maybe even become certified to be one).  I was originally thinking yearly inspections.

13. But I assume, Private Lenders will almost always have higher rates than what can be found for conventional?  Was it still possible to get good cash flow properties when interest rates were high?

14. :-)

By the way I noticed you are in the ATL area - care to share your knowledge on what areas are good investment areas currently?  I'm preferring single-family homes, and I feel like Cobb County is best (Kennesaw?).  Gwinnett County taxes are way too high (I have a property in Suwanee I really want to get rid of).