All Forum Posts by: Art Shalomov

Quote from @Gladys Melendez:

Great thank you, for the information.

I would like to turn into a long term rental.

I'm also wondering what is the best way to go about the purchase would it be smarter to use a HELOC for the purchase or as a second home or investment purchase.

Hey, Gladys. I see your response regarding HELOC or not. This is a good question.

There are many factors to determine what makes sense for your particular situation. I wish there was a simple answer. With just a little more information I could give you some clear guidance. Do you have time for a call this week so we can sort through your options?

Personally, I've done both. I've bought properties with HELOCs and regular financing. It just depends on the circumstances, which we can easily explore.

I look forward to talking with you.

Art

@Melanie Johnston thank you for your endorsement! 
Hi @Gladys Melendez! I would be happy to chat and point you in the right direction.  

Hi @Avery Eaton! I am a local AZ lender and an investor with a large portfolio. I would be happy to help and point you in the right direction with financing and setting up your portfolio.  

I personally like and invest in the north Phx area. When looking at LTRs the lower the price point, the better the numbers will look. Areas like Scottsdale and central Phx have been very popular to invest in but have gotten expensive now.  It’s hard to get anything to cash flow ant the moment especially if you are putting minimum down. North Phoenix, in my opinion is still decently priced and the rental demand is strong. Get a solid, investor friendly agent in the area (I can refer if needed) and look for homes under 500k, 4 bedrooms is a big plus. Im happy to connect if you have more questions. 

@Steven Thomas 

Hey Steve! Getting into the real estate business and building a solid financial future is exciting. As someone who started in my twenties and successfully built a portfolio, I'm more than happy to share my strategies that worked for me. Here's some advice I would give to my 25-year-old self.

Firstly, Arizona is one of the best states to own real estate in. It's a growing state with landlord-friendly tenant laws, making it an ideal location for investment. It's important to note that building solid cash flow takes time, especially in the current market with higher interest rates. In fact, most of the properties you'll come across, especially when buying with a low down payment, won't generate positive cash flow initially. Also, you will need some money to work with. Its tough to do it all with out some cash reserves. Considering your age, I would suggest focusing on buying properties with value add opportunity and growing your equity position first. By continually rolling over the equity from one property to another, you'll see your equity grow with each transaction. This will provide you with additional funds to work with, making your journey much easier. To begin, I recommend purchasing a small, entry-level single family home with value add opportunity. Utilize low down payment programs to acquire the property. Over time, remodel it, refinance, and either rent it for cash flow OR sell it (after 2 years) and reinvest the equity, depending on market rental rates. I would personally recommend selling your first one, so you can get some cash on hand to work with. The second property will be much easier to work with once you have some money. Do this a few times, you will start to acquire more cash and it will be much easier for you to buy properties so you can build your cashflow.

One last thing but very important is for you to build a circle with the right people around you. Build a relationship with a solid realtor who understands the investing game and work with a loan officer, that understands what you are trying to do so they can plan your next move in accordance with the lending guidelines. This is how I built my portfolio. I would be happy to chat more and share my personal experience.

Quote from @Leslie Beia:

So helpful, thank you! Is rate and term only for commercial refi's, or conventional as well? The option had come up with my last commercial refi, but now I'm looking at trying to BRRRR my way to a primary home with some convoluted combination of hard money and conventional mortgages. I'm still figuring out the strategy, but it seems like being able to refi quickly out of hard money would be a great option for a lighter rehab. The trick with the 2nd mortgage is great and certainly makes the numbers work far better! Thanks.

 This is only for conventional/ residential financing. Can be done on primary or investment home. 

@Pedro Huichapa 

Wow, with 2 million dollars in cash, you've got some exciting options ahead of you. It's all about your long-term strategy and what you're looking to achieve.

Given my 15 years of experience living and investing in the Phoenix market, I can tell you that single-family properties are a fantastic choice. The multifamily options here aren't as appealing or affordable, so single-family homes make a lot of sense. They're easier to buy, sell, and rent, plus they tend to attract great tenants.

I'd love to have a chat with you and share more of my insights and experiences.

That “down payment” needs to be. Recorded as a lien along with  NOTE at the time of purchase. 

Attention BRRRR investors: upcoming financing rules could affect your investment strategy. The BRRRR (Buy, Rehab, Rent, Refinance, Repeat) method is a popular way to recoup your initial investment by refinancing with a cash-out refinance loan. However, starting on April 1, 2023, (some lenders will impose these rules sooner) FNMA and Freddie Mac will require a 12-month ownership history for all cash-out refinances. This means that if you planned to buy a property and quickly refinance to cash out, you would have to hold the mortgage for a year before doing so.

But there is a workaround that can still enable you to use the BRRRR method. The trick is to structure the refinance as a rate and term refinance, which means refinancing the existing lien or liens that were acquired at the time of purchase. Here's how it works: let's say you're buying a $500k home with a hard money loan that covers 80% of the value, or $400k. The other 20% or $100k is usually brought in as a down payment. However, you can record that 20% as a second mortgage instead of showing it as a down payment. You record a note and a deed of trust for the $100k, which makes it a mortgage. So now there are two loans that were acquired at the time of purchase.

If you pay off both loans simultaneously, the refinancing is considered a rate and term transaction and not subject to cash-out restrictions. This means you avoid the 12-month ownership requirement, use the new appraised value right away, and without incurring pricing adjustments for cash out (which is hefty). Assuming your rehab boosts the property value to at least $600k, you can get a new $500k loan (combining the $400k and the $100k) and recover your $100k initial investment. Then, you can use that money to buy another property!

It's important to be aware of the new rules but remember the rate and term refinance workaround to keep growing your portfolio. Happy investing!

@Travis Peterson  You’ve got different options based on your personal financial picture. I would be happy to run through the highlights with you to see what might be your best option.
As an investor myself, and someone who works with a lot of BiggerPockets STR buyers, I can share what's working and make some recommendations.