All Forum Posts by: Andrew Lapham

Richard -

I guess the fact that I didn't know about an interest only loan shows how "green" I am to REI. Thank you for the advice and the link to the calculator.

Any further comments on interest only loans? What would be a great rate? Any pitfalls? Have any experience with friends or family loans?

 Thanks!

Andrew

Thanks @Craig Curelop for the welcome!

Marlon,

Appreciate the shout out and thank you for the kind words.  Excited to be here and wish you the same in the Lone Star State!

I am a complete REI newbie looking to gain some knowledge on the financing side of a potential first deal. I was looking for some advice on the following financing plan, plus have what I am sure will turn out to be a very simple answer to an interest rate question on loans.

Plan: Borrow the complete purchase price of a SFR or MFR (under 200k) from family and friends. Structure the family loan with an attractive interest rate (family special, hopefully around 6%) and a repayment period of 13 months. After the property has shown a positive rental cash flow and a great new ARV, refinance at 12 months with a conventional lender on a 30-year loan for 70% to 80% of the new ARV, paying back family and friends and pulling out whatever profits are left for the down payment on the second investment property. The BRRR strategy I have read so much about.

Questions/Concerns:

• If 200k is borrowed from family how would the hypothetical 6% interest be calculated?  For example, could the 200k be divided by 360 payments (30 years x 12 months = 360 payments / around $550 a month) plus 12k divided by 360 (6% of 200K / around $30 a month) for a monthly payment of around $580 be the structure of the loan? Again, I am sure this a really basic question and I am also sure that these are really attractive lending options that aren't really realistic, but I am just looking to better understand the process.
• Any suggestions or templates on how to write out a lending contract with family and friends?  I know that borrowing from family can be extremely tumultuous if the things go wrong and want to cross my t's and dot my i's.  Any great lessons learned from family and friends lending?
• Will a conventional lender refinance on numbers that look roughly like this? I know this is pretty general and fully depends on the new ARV, but what are some potential hiccups with this plan? Our current family DTI is around 28%, solely from the current mortgage on our primary residence. We have no other debt, but I am worried that a lender will think we are over leveraged and we won't be able to refinance.

This is my general plan with lots of future knowledge to be gained before the deal.  I truly appreciate any advice, knowledge or harsh criticism on the plan.  Thank you for your time and I look forward to the discussion.  

Best Regards,

Andrew

Hey Bigger Pockets Members,

My name is Andrew and I am brand new to Bigger Pockets.

• Bio: I am a 27-year-old husband and father of two little ones living in Longmont, CO. I am an Active Duty military member stationed in Northern Colorado while the Navy pays for me to go to school. I am currently studying Mechanical Engineering at CU looking to graduate in May of 2019. After graduation, I will return to my Active Duty service in either San Diego, CA or Virginia Beach, VA.
• Real Estate Experience: I have very little experience in true REI. I have purchased two homes in my life with lots of lessons learned in both experiences. The first home purchased was on the island of Oahu while I was stationed there. A fellow service member and I purchased the home together and lived in it. Our get rich plans were to run a vacation rental out of the home while we were away on training. Needless to say, we were in over our heads and it didn't work out. Lessons Learned: 1) Read the HOA documents to make sure vacation rentals are allowed. We battled with the HOA and they almost took us to court for renting our home out as a vacation rental. Rules are rules and we should have seen it going into the property. 2) There is a lot more that goes into vacation rentals than we originally thought. 3) We got a crash course in the costs of actually selling a home. Purchase price: 760k Selling Price: 850k Fantasy: I just made a killing, and am a real estate genius Reality: Net profit - 2k.  My family and I are currently living in our second purchased home in east Longmont and are still learning the in and outs of home ownership.
• Real Estate Goals:  My wife and I would like to build passive income through either multi-family or single family rental properties.  Our short term goal is to purchase our first rental property by the end of summer 2017 in the North Denver region, specifically Longmont, Greeley or Loveland.  Our mid-term goal is to have two rental properties by the time we leave CO in the summer of 2019 and have a great start to a healthy real estate portfolio.  Lastly, our long-term goal is to continue to acquire properties and build a strong base of passive income to help pay for our children's college and gain financial freedom.
• Bigger Pockets Goals: I have been addicted to this site ever since I found it a few weeks ago. When I am not buried in a calculus or physics book I am reading through the blog posts and listening to the podcasts. I am looking forward to networking with local investors in my area and soak up any knowledge I can. I also have a healthy understanding in what it means to be part of a give and take relationship with a potential mentor. I would love to contribute to the BP / Local REI community in any way possible. Just this morning I listened to the podcast where they talked about "Bird Dogging". What a great concepts and I can't wait to get my feet wet. I love running the numbers on potential properties for practice and am willing to help out more seasoned investors in any way that I can.

In summary, I truly look forward to interacting with the community and contributing in any way that I can.  I am a sponge and a hard worker with a never quit attitude so please reach out to me with anything I can do to help.  Thank you for the time and talk soon.

Best Regards,

Andrew