All Forum Posts by: Aaron Hollingshead

Most people (I suspect) here will encourage you to leverage more than you're suggesting.  But it all depends on your situation.  I'd say that if you can buy properties with 40% in and you're still able to fill your other savings buckets, cash flow, etc then do it.  To me, the older I get the more I value security over maximum leverage.  As an example, I have a quad that's hitting the 2% rule (closing in on 3%, actually).  Conventional wisdom would say I should leave it alone but I'm actually hoping to pay it off in 3 years.  That will mean that instead of making 15,000 a year on the property I'll be making 30,000...I know it's unorthodox, but there's something comforting about having lots of equity.  

Zillow hasn't started charging me yet, but I'll gladly pay that when they do.  It's a terrific platform and if it helps me get a renter quickly, 10 bucks is money well spent.  

Don't worry, I'll be gentle!  My advice would be to just get the final building inspection and don't worry about any issues until then.  Often times a home inspector will flag tons of items that a building inspector wouldn't notice, or even more likely - wouldn't care about!  It's common where I'm at that I'll ask the city inspector about a fix and he'll say, "ah, I'm not worried about that".  So just wait to see what they come up with (there is always something) and get it wrapped up.  If you didn't already do this, I'd write into future contracts that you don't pay the final payment until all inspections have passed.  This is common practice.  And if the contractor is any good, they will care enough about their reputation that they won't make careless mistakes.

As an example, I just did a full renovation and had the inspector look at the HVAC system before we closed up the walls.  He said it looked great.  Fast forward 1 month and he made us open the walls to reinspect...at a certain point you just need to smile and nod and do what they say to get it to pass inspection!  

I can't see any bank offering a line of credit on a property that you're describing, but here are some ideas you can consider:

1. Put it on a credit card (maybe your last option)

2. Request an unsecured line of credit from your bank.  Wells Fargo, US Bank and similar will often do up to 15k or 20k with very little verification unsecured.

3. Ask a friend to partner?

4. Ask a local bank for a commercial loan on the property - will likely be 15-20 years and 6-8 percent interest, but still that's next to nothing if you can get it rented out.  That would afford you the time needs to renovate, pull capital back out and move on to the next.  Good luck

I wouldn't worry about it too much.  Recently I had a place broken into the week before it was set to close and my appliances were stolen. I just chalked it up to the fact that it had been finished and pending sale for too long due to delays and moved on (oh and I also moved the appliances out of another flip until the day before closing).  We reassured the buyer that it was a safe neighborhood (it is) and everybody proceeded as normal.  If you stick with this long enough, this won't feel as painful in a year or two, especially if you learn from your mistakes.  As an example, on my first deal, my "partner" essentially stole 39,000 from me.  I would literally get so angry every time I thought about it for about a year, but fast forward 5 years and 6 figures of flip income later and I see it as a minor speed bump along the way...keep moving forward!  

Once you get it rented, I'd contact a local lender to see if you can get a "cash out refinance".  What's the value of the house?  If you got it all for cash in Ohio, I'm wondering if the overall value might be in the lower range - possibly making it challenging to refinance in a traditional way.  If so, you could consider talking to a local bank and seeing if they would offer a commercial lone, personal loan with the house as collateral or line of credit against the home.  Those rates won't likely be as competitive but they will give you cash in hand and possibly ease compared to a traditional bank.  

The same thing happened to me just yesterday.  I figured out it was because I was using my mobile phone.  Once I used my laptop, it listed and stayed (I just checked).  Good luck!

@teresa 

@Teresa M. I totally get it! we had a tenant break lease the last week of April and I  was worried.  Fortunately I had another tenant t in the place 10 days later.  We have another unit we are finishing renovations on this week so I get the stress... hopefully our tenant screening helps us keep afloat!  One of the biggest aids in our investing was our realtor's connections.   I would recommend you ask your lender,  realtor, prop manager, etc for recs.  Sometimes they willl know "that lender" who can get things don for you.  Sounds like you are persistent and tenacious...you're close! 

It's awesome.  I utilize Zillow now for both applications and billing.  In my rental contract I let tenants know that paying cash will incur a 25 dollar fee to encourage them to use Zillow instead.  One thing I would recommend is turning off the auto apply feature as I had some unqualified tenants apply and spend their money before even talking to me or seeing the house (which I thought was. strange in and of itself, but that's another story).  So I have them tell me about their employment/rental history/who will live there and see the apartment before sending them the application.  I highly recommend it.  

@Teresa M. - If I was you, I'd definitely get a long-term renter in there first of all.  I think that with what's happening now, the security of that would be appealing.  Also, when you talk to lenders, having that income helps an awful lot.  

Second, I'd talk to community banks.  When I first heard people mention community banks and credit unions, I thought of them as being the same.  I then approached 4-5 credit unions only to discover that their rules seemed to be just as strict as the big banks/lenders.  Finally I tried a community bank (2 total branches, the president greets me with a handshake, everybody on a first name basis, etc) and everything became so much easier!  

You might not get the most competitive rates in the world, but some of the benefits make it worth while in my opinion. For instance, I have a quad that brings in 2,000 monIy with a loan of 90k through this bank. Terms are 6% interest 20 year term with a 3 year call. Might not seem to be the best terms in the world, however you have to bear in mind that my loan origination fee was less than 100 dollars as opposed to 5k-10k through a lender, there are very few questions asked, relationships are what count. Also, later on, you can always refinance in a traditional loan if you want to. I could go on forever about the benefits of working with a small local bank. Also in my case, once I built a relationship with them they ended up lending on 3 of my brrrr deals at once while providing 75-80% of the projected ARV. In other words if I buy a house for 60k that needs 30k of work that I'll sell for 120k, they will typically lend me the entire 90k needed. Finding the right bank made all the difference. Best of luck!