All Forum Posts by: Vincent Pace

You can't go wrong with George Foster from the Buyers Protection Group.

Three words. The three words that I am about to type could end up saving you thousands of dollars in wasted money. Here it is, are you sitting down? Run your numbers. Run. your. Numbers. Why? Because sometimes a higher rate could be a lower cost of capital.

Which of these is cheaper: 12% and 2 points or 16.99% and 0 points.

Answer: It depends.

In the picture above, the curved grey line represents your cost of borrowing at a given time at 12% and 2 points. The yellow line represents 0 points and 16.99%. As you can see, the lines intersect, and a the difference between the lines is the amount you would save or lose. If you were able to rehab quickly enough, 16.99% would be cheaper than 12%!

What happens when you add two more points on to the 12?

16.99% is cheaper than 12% and 4 points until day 288; that's nearly 10 months!

Now let me ask you this: which of these is the better deal?

• 12% and 0 points, interest accruing on the full loan amount
• 16.99% and 0 points, interest accruing on only amounts funded

Answer: It depends. To compare, you need to know how much money will be out and for how long.

Let's look at an example. The loan for the purchase is $100,000. The construction loan is $60,000, provided in 3 $20,000 draws on days 30, 45, and 60 of the project. Also, the property sells and the loan is repaid on day 120 of the project. Here's what the two loans would look like; 12% on funded and unfunded amounts compared to 16.99% on only funded amounts.

The dark yellow section on bottom represents the funds being charged on interest at 16.99% on funded amounts only. The up-ticks represent increased interest on rehab draws. The grey section represents the additional loan amount you pay interest on when the lender charges interest on the total loan amount from day one. Here's what the interest accrued looks like for both loans:

The gray area shows how you accrue more interest, even at the lower rate!

12% accruing on the full loan amount = $6,400 in total interest.

16.99% accruing on only amounts funded = $5,500 in total interest, a savings of $1,100.

Counter-intuitively, your costs of capital are 14% lower at the higher rate. 

It gets even worse with points!

So, what's the point? Well, paying interest on only amounts funded can result in big savings, even at a lower rate. The larger your construction budget, the better paying on only amounts funded will be. Paying on only amounts funded will save you more the longer it takes to reach full funding. And, of course, run your numbers!!

When: Monday, January 30th

Networking – 6-6:30 PM

Speaker – 6:30-7:30 PM

Who: Vince will be joining us to speak about financing your real estate investments. He’ll show you how to calculate your cost of borrowing capital and how to compare lenders apples to apples.

Vincent manages Barnett Capital’s nationwide residential lending business, providing loans to acquire, renovate, or construct single-family, multi-family, and mixed-use investment properties. His other responsibilities include assisting with the expansion of Barnett Capital’s real estate portfolio and serving as in-house counsel.

Prior to joining Barnett Capital, Vincent spent eight years working in the Tokyo, New York, and Beijing offices of major international law firms, with a practice focused on capital markets and mergers and acquisitions. He holds a juris doctor from the University of Pennsylvania Law School, a master of laws from Tsinghua University’s School of Law in Beijing, China, and a bachelor of arts from The George Washington University.

Vincent speaks fluent Japanese and proficient Chinese, Spanish, and Portuguese.

Check out Vince's podcast:

http://joefairless.com/podcast/jf743-how-a-funding-source-automates-and-markets-amazing-deals/

Vince is also the co-host of Real Estate Airwaves. Tune in to AM 560 on Sundays from 12-1 PM

Thanks all for the RSVP! Here's all the information you'll need for tonight:

Where: 450 Skokie Blvd, #600, Northbrook, IL. Drive to the end of Henrici Road, take a left at the fork, and a right at the first parking lot. The office is last one in the lot.

When: Monday, November 28th

Networking – 6-6:30 PM

Speaker – 6:30-7:30 PM

@Brie Schmidt will be joining us to speak about her success as an investor, and will cover topics like the acquisition of in-state and out-of-state properties, rapid business growth, property analysis, rental management and more.

Brie Schmidt started her Real Estate career at the age of 17. In 2011 she began her real estate investment career by purchasing and managing rental properties. Her successful investment strategy has culminated in owning over 90 units in Chicago and Milwaukee. In addition, she co-founded TurnKey-Reviews.com, a resource for investors looking for testimonials of turnkey rental properties. Through her hands-on experience of real estate investing by building a multi-million dollar portfolio she has been featured on various podcasts and spoken at REIA events and real estate conferences about investment strategies and property acquisitions.

Check out Brie's podcasts:

- www.biggerpockets.com/show78

- www.joefairless.com/blog/podcast/jf47-but-its-sooo-shiny-nope-stick-to-your-criteria/

- https://itunes.apple.com/us/podcast/life-on-pire-show-passive/id910358716?mt=2

- www.investfourmore.com/2015/06/buying-multifamily-in-multiple-markets-with-brie-schmidt-podcast-001/

- www.biggerpockets.com/show132

-https://landacademy.com/learn-real-estate-karate-with-brie-schmidt/

- www.freedomrealestateinvesting.com/cash-flow-properties-with-brie-schmidt-rei-038/

- http://www.fifighter.com/finance/real-estate-thoughts/2015/08/real-estate-investing-turnkey-investing-podcast-with-brie-schmidt-and-fi-fighter/

- www.newworldrealestate.co/2016/04/28/brianna-schmidt/

- http://joefairless.com/podcast/jf557-how-making-a-tough-decision-elevated-her-rental-company/

Brie is also the host of the "TurnKey Investing Podcast" http://turnkey-reviews.com/turnkey-investing-podcast/

We hope you can join us at our next networking event. We'll be analyzing deals in Chicago by relying on our contacts that have years of experience and knowledge. Be sure to take this opportunity to network with other investors, contractors, brokers, property managers and more!

Where: 450 Skokie Blvd, #600, Northbrook, IL
When: Monday, October 24, 2016; 6:00 PM to 9:00 PM
What: This month’s networking event will be a shark tank style deal analysis. Bring any deal you want: one that you have under contract, want under contract, or what area’s you’re looking in. Our experts will analyze the comps, rehab to be done, marketability and more! You don’t necessarily need to bring a deal to this meeting, just pen, paper and plenty of business cards.

This month’s networking event will be a shark tank style deal analysis. Bring any deal you want: one that you have under contract, want under contract, or what area’s you’re looking in. Our experts will analyze the comps, rehab to be done, marketability and more! You don’t necessarily need to bring a deal to this meeting, just pen, paper and plenty of business cards.

Justin will be speaking about using technology to automate and grow your Real Estate business. Learn how to:

• Track Projects
• Track leads
• Track your inventory
• Keep track of offers
• Keep up with your tenants
• Stay up to date on your project's financing
• And more!

Justin Ericcson is the Founder and Managing Partner of ProfitFromRentals.com (PFR) and other Real Estate Investment enterprises. Over the past six years Justin has generated millions of dollars in passive rental income for clients. He has also managed the acquisition, sales and marketing of over $150 million in real estate assets, owned several successful technology companies and created a name for himself as a visionary entrepreneur with a highly trained eye for opportunity. Mr. Ericsson's most recent and notable accomplishment was founding the Changing Chicago Foundation (a 501c3 public charity) which operates the only privately funded vocational training program in Chicago. Changing Chicago Foundation is currently preparing to train and employee well over 100 trainees in 2015 & 2016 with many of the graduates going to work for PFR affiliates. Currently PFR owns or manages over $36,474,000.00 in cash flow properties and has sold over $26,343,275.00

Networking – 6-7 PM

Speaker – 7-8 PM

@Ben Anderson I look forward to seeing you tonight!