All Forum Posts by: Adam A.

They refused to repurchase two from me, which had me worried, but I ended up selling each of them for 30-40K more than I was going to sell to them for, so they did me a favor... poor decision making all around. 

What websites or portals have you been using to find good off market opportunities? I have been using these below, but I'm curious if anyone wants to chime in with ones that I am missing.

Investorlift

Sundae

Auction.com

Hudsonandmarshall

Xome

Hubzu

My and a friend have three deals with them that they backed out on, please keep me informed of any litigation. 

Quote from @Scott Trench:

I really don't like this approach at all, and I think that folks who use HELOC after HELOC to finance property will find that real estate compounds financial pressure on their lives, rather than compounding freedom.

Here's an example. Suppose that I purchase a property or $480,000 and after a $360,000 mortgage, I generate $6,000 per year in cash flow (5% CoC ROI with $120,000 down payment).

This makes sense and for some investors, would be considered a "single" or "base hit". 

Now, let's assume that instead of bringing cash, I brought the $120,000 down with a HELOC from my primary residence, at an interest rate of 6%.

The interest alone on this HELOC is $7,200. So, right off the bat, I have to bring $1200 per year to continue operating and owning this property.

But, we also, at some point, have to pay off the HELOC. A HELOC is a short-term debt instrument. Even if we assume we will pay off this $120K over 5 years, that's $2,000 per month in principal repayment. $24,000 per year.

Rather than putting money in your pocket, this HELOC financed rental property is requiring you to hustle harder than ever to come up with $25,000 per year to keep your rental, for FIVE YEARS.

While it is possible that at the end of 5 years, you could have a cash flowing asset, that has appreciated in value and amortized the mortgage, those are not likely to be a fun five years, and for me, defeat the purpose of real estate investing in snowballing my wealth and making my life easier and easier, financially, with each investment. 

The HELOC, in my opinion, is much more appropriately used as a short-term financing tool. For example, I might use it to fund or supplementally fund a fix and flip project, or a BRRRR investment. For this purpose, it can be a great alternative to private or hard money.

I just sometimes worry that folks who try to get into real estate, and use HELOCs to fund down payments on long-term investments, will find themselves in for a very hard road ahead, especially if the markets do not appreciate the way they did the last several years. 

Solid advice, agreed short term lending product and 10x better than a HML at a higher rate plus points. Using a heloc for a DP on a long term asset is essentially borrowing the downpayment on an ARM, easy to get over your head and under water on both the property purchased and the property you have the HELOC on especially when there is a high downside risk which is the current scenario. 

Find another lender, I'm looking for a heloc on an investment property and got line limits ranging from 62K to 250K from three different lenders. Each lender has their own set of ridiculous rules and ways of doing things. Some use self employment income others won't, some will count rental revenues others don't, some will do full appraisals while other only do desk top automated valuation "appraisals" in their initial quote which can be a drastic difference. I'd ask for a detailed breakdown on how they arrived at the value/line limit amount. 

Quote from @Josh Davidson:

The interest rate is very appealing. To the question of safety, the accounts are FDIC insured which covers my deposits. Risk of Stessa/Roofstock going under could happen and I could temporarily lose access to my money but I wouldn't lose any funds.

However, I have the following issues:

1. Maximum ACH and debit card daily limit of $1,500. So if I need to pay a vendor more than that, what...I have to may daily payments? So if I need a big repair or a new furnace or roof or a renovation project...how can I pay them? Wire transfer??? Good luck getting your local contractor to accept a wire or give you their bank account info so that you can send an ACH. It's impractical and comes off as unprofessional.

2. No bill pay and they don't support checks. I hate checks, but I still run into the occasional vendor that doesn't accept ACH transfers, debit/credit cards, Venmo etc. This account literally gives me no way to pay them.

3. Maximum DEPOSIT limit of $15k/mo. This doesn't work for me unless I split each building into a separate account which adds unnecessary complexity.

I can see using this account as a savings account to stash security deposits or other short term cash but not as a checking account to run my business.

 I've started using the cash management accounts and overall happy with them...they recently started charging for a "pro" version @ $16/mo. But it also upped the APY which is now 4.3% which I think is pretty enticing and I think 1% cash back on debit card use. Tenants have been paying in without issue thus far and the banking integration with the system is nice. I would agree with Josh though....the bill pay "restrictions" are problematic, not being able to mail out a check is challenging, and ya no small scale contractor is going to give you wiring instructions to pay a $500 bill. That's a pipe dream. But I think you can link their debit cards up with Venmo but again a $1500 daily cap is quite limiting.

After an exhaustive search I finally found two lenders that offer 1st position HELOC's on investment property. Trying to decide which one I should go with. In a nut shell it's 208K at in my opinion is a decently attractive rate for NOO, or take a 2% higher rate to have access to an additional 50K. If you know of any lenders that do HELOC's on investment property in Georgia I'd certainly welcome a recommendation.

Lender #1

65% LTV ( Prime -.17) = 7.33% Variable APR with loan limit of $208,000

$65 annual fee starting in year two 

No closing costs, Max termination fee $300 within 3 years

Lender #2

70.00% LTV (Prime + 1.25%) = 8.75% Variable APR with a Limit of $224,000
75.00% LTV (Prime + 1.50%) = 9.00% Variable APR with a Limit of $240,000
78.13% LTV (Prime + 1.625%) = 9.125% Variable APR with a Limit of $250,000
80.00% LTV (Prime + 1.75%) = 9.25% Variable APR with a Limit of $256,000

$100 annual fee starting in year two

No closing costs, need to repay closing costs if closed within 2 years 

Penfed has Axed the Non Owner Occupant HELOC. Gotta love it how they pull it right before I was about to do two investment helocs with them.

Great list, finding lenders who offer rental heloc's is like finding a needle in a haystack....let's keep the list going and up to date! 

It'll be tough. Check out crowdfunding platforms, Groundfloor would be a good option 5-12% return.  Use it to start a wholesaling operation and use the 5K for earnest money and hustle to unload the property to an investor. 

I think you'd find that you need more drive and determination than the need for money. Energy and persistence conquers all things. Set goals, dream big, pray for guidance, surround yourself with successful people that aren't trying to take advantage of you by charging you 10K to take their guru class.