All Forum Posts by: Tyler Kastelberg

@Mauricio Ramos

Mauricio: There is no tax advantage for the seller, they would have to pay income tax on the loan interest and capital gains (plus partial recapture) on the down payment.

Best of luck!

Originally posted by @Patrick Liska:

Originally posted by @Tyler Kastelberg:

@Jason Waldo, I'm going to take a contrarian view to most of your responses. As a syndicator who uses leverage for a living, I like to keep leverage on my personal investments quite low. This allows me to act fast on new opportunities that hit the market. 

We have been witness to one of the biggest real estate booms in the history of the US over the past 7 years, and many investors have forgotten the fear of leverage. 

My advice: Payoff the properties, and open a line of credit. Use the line of credit to quickly act on new acquisition opportunities.

Best of luck!

 Tyler,

You are saying the same as everyone else. yes you like to pay down more so that there is more equity but you are using that equity and creating a lien against the property in the form of a HELOC and then stripping that equity from the property to purchase more properties, you are using your own money and not the banks money to invest more. i would rather use as much of the banks money as i can and not my own and have the tenants pay the mortgage down for me while gaining the equity of the property and income with little invested. I understand the more you have paid off the more is available and ready for you to buy more but why give it to the bank to reuse. if you pay your regular payments, and your tenants rent covers all expenses, and put the profit in a savings account when another property comes up you use the money in the savings as down payment, interest free.. what you are doing by paying down the debt, then borrowing from the equity, is paying interest on a loan against money that should have been in your savings earning interest, not much, but earning but you are still doing the same as everyone else has mentioned by keeping the payments going and then using the equity that is in the property to buy more properties.

Patrick: Thanks for the comment.

I'm more concerned with liquidity than leverage. Yes, increased leverage will generate greater returns. However, paying off debt will prevent an investor from becoming illiquid. With SFR or small multifamily investments, you live or die by the performance of very few tenants. In a market retraction, I'd rather have low to no leverage assets than can be leveraged for good opportunities than many highly levered assets that might require cash injections if a tenant or two goes bad.

Hope this helps!

@Mike Dymski

Mike: Thanks for sharing the charts. 

Given the relatively low leverage in the market and that the percentage of foreclosure sales is still at an all time low when compared to traditional sales (a leading indicator of a retraction in the market), do you have an opinion as to whether or not the next turn in our market will be stagnation or retraction?

@Shanna Cox, great question.

Investing out-of-state is a great option if:

1) you have expertise in the area you are investing, or

2) you are investing with a trusted person who has expertise

The Texas market has great value -- a number of people are expecting a rise in Houston values over the next few years. Perhaps look there?

@Jason Waldo, I'm going to take a contrarian view to most of your responses. As a syndicator who uses leverage for a living, I like to keep leverage on my personal investments quite low. This allows me to act fast on new opportunities that hit the market. 

We have been witness to one of the biggest real estate booms in the history of the US over the past 7 years, and many investors have forgotten the fear of leverage. 

My advice: Payoff the properties, and open a line of credit. Use the line of credit to quickly act on new acquisition opportunities.

Best of luck!

@Jasmine Benford I really like DB Construction, will DM you her info. Tell her that Tyler Kastelberg sent you!

@Brent Coombs, The short term return would have to be in the form of a preferred return on the investor's equity contribution. Not many lenders with whom I work are ok with mezzanine debt. In effect, the distributions would act like interest on a loan. Did I answer your question?

@Jim Froehlich

Jim - I've done something like that in the past, and I have the name of an agency debt firm. FYI - All agency debt is non-recourse, but you'll need someone who can sign a "big boy" letter.

I'll drop you a DM with more details.

Jim - I’m chiming in late, but I think you’re on the right track. If your loan will be greater than $1 million, consider using agency debt ... 20% down, 30 year amortization, low interest rates. My investor pool likes 10%+ yields, but your pool might have other expectations. Ask your attorney about a 4A2 syndication if only using friends and family. The cost is much less, ~$10k. I’m happy to refer you to the attorney I use if interested.

BP Community - Is there a market for short term, equity financing within syndicates that need extended time to raise permanent capital?

I know some investors use LOCs for this, but I've considered offering it to investors who want a healthy, short term return without being married to a 5 year deal. Has anyone done this before?