All Forum Posts by: V.G Jason

Quote from @Erik Estrada:

Quote from @V.G Jason:

Quote from @Erik Estrada:

Quote from @Dolphurs Hayes:

Hey I am currently getting closer to closing my first BRRR deal but I wanted advice on how ppl went about the cash out refinance step. Is it tougher to cash out refinance when the title is in LLC? Any tips on how to secure a bank loan under a LLC?

 What's the goal for the cash out? 

You could look into a DSCR loan as others mentioned but be aware that many of these are 30 yr fixed Principal and Interest, have 3-5 year prepayment penalties, and max LTV is at 75%.

There are a few other options that I am seeing work for most investors in this market. 5/1 ARM with fixed interest only for 5 years, rate and payment are much lower on these. 1 year bridge loan at 80% LTV, no prepayment penalty and interest only.

Correct me if I'm wrong, you gain no equity in Interest-Only options? So in 5 years when if I refinance, I'm refinancing for a new term, new appraisal which is now a larger PITI, I just paid interest for 5 years and now have a bigger mortgage after 5 years. Zero equity to show. Am i understanding IO loans right?

 You are paying interest on the current balance and not paying off any principal for 5 years. If your property appreciates during those 5 years you still could gain equity come time to do another cash out refinance through the new appraised value. If you decide to leverage that new equity then your balance will increase and could have a higher payment if interest rates are the same or higher. 

On top of that you can write off the interest as an expense come time to do your taxes. If your goal is to own your property outright then it wouldn’t make sense to ever refinance unless it’s for a shorter term. 

What are your goals? 

Appreciate the reply. Goal is pretty vanilla; buy & hold, CF & Appreciation. I guess a hard example would be really helpful. Say I loaned 75k for a property, put down 25k(25%). It's 10 year IO on a 30- year term(20 back years are fixed). Say after 10 years my property has appreciated & appraised to $125k, I gained zero equity thus far right?

If I refinance, my original equity stake(25%) is now worth more sure. So if I took a new, conventional 30 year loan. I now pay PITI on 30 years @ 75% of the new value and paid 10 years interest for cash flow arb if I did it right. My alternative is not to re-finance and pay 20yrs PITI @ 75% of old value. If it really appreciated a lot, that may make more sense.

I'm just not seeing the sense in IO options, except for cash flow arb & tax deductions(but you get tax deductions on interest anyways on any loan). If you have an example of how it makes sense, I'm game. It's possibly a good strategy to buy time, maybe?

Quote from @Erik Estrada:

Quote from @Dolphurs Hayes:

Hey I am currently getting closer to closing my first BRRR deal but I wanted advice on how ppl went about the cash out refinance step. Is it tougher to cash out refinance when the title is in LLC? Any tips on how to secure a bank loan under a LLC?

 What's the goal for the cash out? 

You could look into a DSCR loan as others mentioned but be aware that many of these are 30 yr fixed Principal and Interest, have 3-5 year prepayment penalties, and max LTV is at 75%.

There are a few other options that I am seeing work for most investors in this market. 5/1 ARM with fixed interest only for 5 years, rate and payment are much lower on these. 1 year bridge loan at 80% LTV, no prepayment penalty and interest only.

Correct me if I'm wrong, you gain no equity in Interest-Only options? So in 5 years when if I refinance, I'm refinancing for a new term, new appraisal which is now a larger PITI, I just paid interest for 5 years and now have a bigger mortgage after 5 years. Zero equity to show past my original downpayment. Am i understanding IO loans right?

Quote from @Terrell Garren:

Quote from @V.G Jason:

 Pokemon, Twerking, and MC Hammer did not disappear in a single day. 

They still haven't disappeared, but that's not in anyway relatable to bitcoin.

You need to talk to an attorney and CPA, but the most obvious thing would be for property 2's LLC to do a 0% interest loan to property 1 with grace period.

Quote from @Robert Conlin:

Interesting view

https://theconservativetreehouse.com/blog/2022/11/24/housing-sales-to-institutional-investors-dropped-30-in-third-quarter/

 Well of course. If fed funds has gone from nothing to 4% and growing, institutional investors quit playing ball. They were just playing when it's free. If they say put prices at the spring of 2021, interest rates were what 3-3.5% then? You're looking at 7-9% now at the same level. Even with the feds fund up, in a 2 year timeline you're looking at double the rates for the same price of house. Scary to know what values would be if rates stayed similar. 

Question is when does the pullback turn into selling? Don't think institutions are selling yet, or really ever, it's mom & pop who thought they could hodl their house and are now seeing people running away. They kept thinking they could get higher. Interesting note about West Palm Beach. I can see this being quite resilient in this market.

Quote from @Jeremy Horton:

Hmmmmm 

Congrats pretty cool deal structuring you have going...

I'd be interested in seeing how much these turnkey places cashflow and what the ROI is (being a turnkey it already has lower margins and very laxed estimates on vacancy/repairs/CapEx) after paying investors 8%, purchasing at market rate and at 100% financed. I have seen RE Nation spreadsheets and while that may be their real world experience I personally find many of their expense estimates very low - while only a "rule of thumb" their properties don't come close to touching the 1% rule.

Interesting angle that you plan to refinance at "reasonable" rates. What's a reasonable rate to you? The sub 3% rates are the lowest in history, I could see a 5-6% rate being the norm, but I would be careful planning to refinance at rates equal or lower to 4%. In order to get your monthly payment down you would have to refinance at a lower rate or a much lower mortgage balance (which means you are holding the property for a very very long time). On top of this, you would be using a DSCR loan with an adjustable rate for the majority of the properties? What's the plan when you have to refinance or pay off the property and the rate goes up?

What are the terms on the investors savings accounts? 8%/year for 30 years for a conventional loan? Seems like a no brainer for them. I give you 10k as a downpayment and you send me an $800 check per year for 30 years?

I think appreciation may be your main friend here and this seems to be a very long term 20+ year strategy, but it's a very neat idea at the same time.  

Agreed, I am not sure the math really adds up here curious to the actual numbers. If your original interest rate was 2.75% that's great, the rental rate I assume has gone up in almost two years but its likely you're only capitalizing on that once a year which is negated by taxes.

But if you're paying a 8% note and you're 100% leveraged, don't see how this cash flows unless it's an interest only deal then you're totally back end exposed and not gaining any equity when you do re-fi. Also, waiting to refinance to another 30 year term when rates come down is a time game, who says they ever come down what if this is considered "low"? And secondly doesn't refi usually require an appraisal. So if/when rates comes down, and your property gets re-evaluated higher, won't your new loan be bigger albeit at a lower rate?

Quote from @Terrell Garren:

Bitcoin is 13 years old. The gimmick peaked in 11/21. 

And anybody can cherry pick graphs.  Wrap you head around this. 

 You're the one who cherry picked the graphs. I just put Facebook, Amazon, and Netflix YTD. Peaking means you think it's an all time high, but not dead for certainty? Why would it have any tangible value then and why is it not 0 then?

Quote from @Terrell Garren:

Quote from @Eric Carr:

Is this a wake-up call to lawmakers? Senator Elizabeth Warren, Democrat of Massachusetts, in a Wall Street Journal opinion piece, likened crypto to the subprime mortgages of 2008 and called on Congress to act fast to prevent risk to the wider financial system. Warren and two Democratic colleagues also wrote to Abigail Johnson, C.E.O. of Fidelity Investments, urging her to reconsider allowing Bitcoin exposure through the firm’s 401(k) plans and sponsors. Attorney General Laetitia James of New York urged Congress to stop retirement investments in crypto altogether. “We don’t need another reminder that cryptocurrencies are unstable,” she wrote on Twitter.

 Yes, without regulation, and more importantly with off-shore entities these centralized exchanges things can go haywire. With regulation, it'll bring up consumer sentiment and ultimately adoption. 

Unfortunately, they didn't take it off the centralized exchange. That's an exchange issue, not a bitcoin issue. Bitcoin can't be wiped away on your cold storage, it can be when it's sitting on an unregulated platform in the Bahamas that are not audited.  Likewise, your house and money can be confiscated in certain jurisdictions too. Oh wait that happened in 2008 with houses, and almost did with your actual fiat currency if the bailout didn't happen. 

Bitcoin is young, and slowly growing, it'll get the right structure.

Quote from @Terrell Garren:

 Good point. Please help me decipher this. 

 Same way you can explain these, and don't play coy FAANG was the ultimate bread & butter for so long.

If you can have a massive credit cascade, a deviant play similar to Enron within the ecosystem, and the price still doesn't get to 0 what does that say? 

It's binary, it's going to 0 or it's going to go up. It doesn't seem to want to go to 0, and last I checked the more regulations and adoptions that come to it's environment the pricier it'll become due to it's finite structure. Fidelity just onboarded it, Schwab is nearing it, Goldman & Citadel are preparing for institutional offers. When the massive institutions want to own a minute, say 2-5%, of bitcoin and they right now own 0. Go short it when that structure is available, and the institutions are bid side. You'll get erased. You'll also notice when they are bid side trying to own collectively 1-2 million bitcoin, liquidity is going to dry up and it'll block trade. Go look at the largest wallet holders and look at outflows, it's been zero for years.

It's now not a matter of if, it's just when.

Awesome and interesting. I did the same two years ago, backed out when I realized it just wouldn't make any type of sense financially. Beautiful time & area.

Do you foresee this Brickell complex changing short-term rentals when some of the bigger institutions come into Miami?

Especially with Citadel, among other players coming in the area, Brickell especially I can imagine these kind of rules changing in the near future.

Does your building have an upcoming allocation for the HOA? 

How many days of vacancy have you projected?