All Forum Posts by: Zebuel Early

Thanks Dave!

I'm an investor living in The Bay Area looking to purchase my first out-of-state asset in Northwest Arkansas. Prices are just too high for me in my market. However, having just switched over from a Sole Proprieter to an S-CORP, I'm having trouble getting pre-approved for a conventional loan due to my income on paper. My wife and I have quite a bit of equity in our home w/ a current 30 year fixed mortgage at 3.375%. We're looking into different ways of utilizing that equity for an investment property. I'm thinking of taking out $200,000 so I can make a cash offer when I find a deal worth jumping on. My options are: 

1: a HELOC from a local credit union with an interest-only adjustable-rate payment for the first 10 years. The idea here would be to make the interest-only payments and eventually refi into a conventional loan. The payments would be about $625 per month on the interest which isn't deductable from what I understand, but it's a low monthly out-of-pocket fee.

2: a Fixed Rate Cash-Out Refi locked in at 4.25% with closing costs around $5k. I'd be jumping up a whole percentage point and paying more per month but I'd have cash to invest. Plus you can deduct interest on a fixed-rate mortgage whereas you can't on a HELOC.

*With all that's going on with interest rates and the war right now, what do you all think the best strategy is in using my home equity?  Do you think this is a smart move right now? Do any of you advise against it or do you have any other ideas or advice? Seems like a crazy time to invest but I don't want to just sit on the sidelines. 

Thanks so much!

@Dave Spooner Thanks so much Dave! This really helped.

@Dave Spooner Thanks so much! I did add some CapEx and Vacancy but hadn't thought about bills while vacant. That's a really good tip. I also hadn't considered presenting my numbers to the seller. Is this still an option even tho I've already made an offer and they accepted? Property is getting inspected today, appraisal to follow. If it appraises for lower than list price I definitely have some wiggle room.

@Colin Reid Thanks so much for taking the time to give me some feedback! The college town aspect is a bit worrisome I agree. The town itself is also growing exponentially so that’s a plus but yeah, this may not be the year to jump on this one!

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Hey everyone! I'm a new investor looking to make my first deal. I won a bid and am getting an inspection tomorrow.

I own a home in California but have a brother in Arkansas who is able to manage properties for me in a growing college town. A house recently came on market in an area that is blowing up and increasing in value quickly. The house is 95 years old but was recently rehabbed with new appliances and carpet, granite countertops and all. After analyzing the deal, assuming I get $1000 a month for rent, and after putting down 25% on the $160,000 property, it looks like my cash on cash ROI will only be around 2.5% and cash flow is only $93 a month.

The benefits would be appreciation, tax depreciation wright offs, 1.5 acres of land with an easement for a possible future unit addition, family in the area to manage, no rehab necessary, low cost compared to my local market. 

I'm also leary about getting into the landlord biz right now given the current state of affairs and part of me thinks holding out in case of a possible recession could be wise. There may be tons of foreclosures in the near future.

Question: Should I take the risk and buy or hold off for a better property that generates more cash flow?

Thanks!