All Forum Posts by: Will Johnston

@Carlo Rodriguez, I second @Steve K.'s advice to use the HELOC to pay off the high-interest portion of the $40k.

And while without knowing the market your looking to buy in or the specifics of your debt I can't be sure, on the surface it seems almost irresponsible to do anything else. It's doubtful you're going to get a 15-20% return (or at least cash-on-cash return) on an investment property, which is what you would need to do to justify buying the property before paying off the credit cards.

If you're averaging 15% on the cc, student loan, and tax debts, then you're looking at spending $3k/year in interest just on those. With a HELOC at 5%, you're down to $1k/year. Get your HELOC, pay those off, and you just made $2k with almost no work.

Not sure what rate you're paying on your car loan, but if it's low, I wouldn't pay it off. (Selling and buying a beater is a priorities choice. Up to you.)

I've got a car loan at 2% from my credit union.  I can get a way better than 2% return from investing my money, so why would I pay that off?  Shoot, I can get better than 2% in a long term CD. If you don't have a good interest rate on your car loan you might be able to refinance into a better rate if you have good credit.

Once you have the HELOC and have paid off the high-interest debt, you can start paying down the HELOC, but you can also start looking for an investment property (assuming you have enough left over on the HELOC for the down payment). You have the flexibility to continue paying down your debt but still do a good deal if you find one.

For what it's worth, I'm actually in a similar position now. I have a $12k-ish car loan and a $56k balance on my HELOC (although mine was from a house purchase, not consumer debt). That HELOC balance had been around 100k, but I kept paying it down while searching for a deal to do. I found one, so I've paused on paying down the HELOC. I'm pursuing the deal and will take a sizable draw against my HELOC for the down payment on the new place. Once I'm up and cash flowing, I'll use the additional income to start paying the HELOC down again until I find my next deal.

I refinanced a property about four months ago, and when rates dropped over the summer, I began the process of refinancing again.  Due to lackluster service and better pricing elsewhere, I did so with a different lender.

Since then, I've learned about the concept early payoff recapture, and, not wanting to cause any problems for my previous lender, I inquired about the recapture period on the previous loan.  Unfortunately, it is six months, not four.

I contacted both my current lender to see what it would cost to extend my lock for another couple of months (around $2k) and reached out to the previous lender to see if that's something they would want to cover to avoid the EPO recapture, which I believe would be quite a bit more than $2k.

They had no interest in doing that, so before making a decision on how to proceed, I wanted to gather a bit of collective wisdom from the forums.

My first question is, does anyone have any creative ideas for how to work around this?  I'm really not out to mess over my former lender.  If I had known about this concept, I wouldn't have even started this process until that clock was close to expiring.  I've thought about letting my loan float and re-lock, but that would cost even more than just extending the lock.

My second question is regarding liability.  To the best of my knowledge, nothing in my closing documents discussed EPO recapture, and my closing disclosure specifically says that there is no prepayment penalty.  Am I correct in assuming that the liability for the recapture lies solely with the lender?

I recently did a cash out refi on an investment property to pay off the line of credit I had used for the downpayment on said property.

I have about $5k in funds left over, and I'm trying to figure out what to do with them so that the whole amount of interest on my mortgage on the investment prop remains tax deductible.  Here are the possible scenarios I'm considering.

• Pay down the principal on the investment prop.  Of course, if I wanted to do that, I would have just taken out a smaller loan with smaller payments to start.
• Use it to pay down the remaining balance on my line of credit, which was used for the down payment on my primary.  I'm assuming if I do this I can continue to deduct the interest, although I'd have to actually separate out how much of the loan is for the investment prop (98.5ish%) and how much is for my primary residence (1.5ish%).
• Use it to pay ahead on the mortgage on the investment property.  Would this actually be a tax deductible use?
• Buy another investment property.  But I don't have the time to facilitate that purchase at the moment, so I would just have the cash sitting around in an account bearing 1% interest for six months until I'm ready to buy my next door.
  

Other ideas?  I don't have any capex on the property at the moment, although that's not to say there won't be in 2-3 years.

Thanks!
Will

Last year my wife and I started renting out the house that had been our primary residence.  We wanted to purchase another investment property, but our lender informed us that we could not use the income for six months.  This, of course, made our debt-to-income ratio all out of whack and we were unable to purchase the additional property.

Currently we are considering buying a two unit property and living in one of the units for a year. After that, we'd look to purchase another SFR to live in longer term.

I'm wondering whether we'd be able to use the rental income from the two unit property to help qualify for the new mortgage immediately or if we'd have to wait the six months.  I'm assuming we'd have to wait, but I wasn't sure if there was a different rule for multi-unit properties.

If we can use the income, would we only be able to use the income from the unit we had been renting out longer term?  Or would we be able to use the income from both units?

Thanks in advance!

I'm looking at a long, skinny rowhouse that's currently configured as a 2 unit, but could probably be reconfigured for three units for either rental or condo conversion.

Several of the existing bedrooms have their only window into a shaft that I'm pretty sure was put there explicitly for the purpose of allowing light into the house.  It's fairly sizable, probably 2.5' wide x 15'+ long.

I'm trying to figure out if the windows into this shaft would count as a second means of egress, allowing the rooms attached to it to be legal bedrooms.  If the answer is no, there's not a great way to configure the thing, as I'm pretty sure it was built with this in mind.

One thought I had was that perhaps a fire escape ladder could be installed to allow access to the roof and then another ladder or stairs installed on the roof to allow access to the yard.

Any insight would be appreciated.  And this is in DC, so if anyone has any specific experience here, that would be great!

Thanks!
Will

Getting paid on the 5th or 6th sucks, but if I had tenants who were otherwise great, I'd deal with that.

You might run into fair housing law issues if you try to charge them more because they have kids. (Although I am not a lawyer, and I could be wrong here.)  You could charge them more for having more pets.

You mentioned that you feel like they should be paying more.  Is that just because of the kids/pets, or are comparable units in the neighborhood renting for more?

I usually consider up front repairs as part of the acquisition cost, although I'd be interested to hear what others think. Presumably these repairs should increase the value of the property, so you could refinance to get some of your cash back out and make your CoC numbers better.

Alrighty, @Jay H. , I've read both posts.  If you'd be willing to share some secret sauce, I'd be most appreciative!

Thanks, guys!  Much appreciated!

I just finished up the online portion of my real estate licensee class. Now I just need to take the class exam and the actual licensee exam. I was wondering if anyone could recommend a good study guide/book for the test. The class I took was lacking, and I'd like to make sure I'm all set for the test (not to mention being an agent). Thanks!