All Forum Posts by: Brian Ellis

I think everyone is overlooking the deal itself. The question is what is your return on investment with a cash out refi?

If it’s stable and rented, and you can still cash flow at a comfortable number, I’d say cash out refi now. Plus you will be able to invest in more assets. Rinse and repeat. Again, it all depends on your return after a cash out refi. 

Quote from @Kieffer Vittetow:

Hello all. I am currently interested in being a real estate investor around the Indianapolis area. I am not a current investor but I am wanting to know if there are any agents who are investors themselves. I am interested in single/multi family properties mainly for both long and short term. I would love to be able to interact and learn in any way, shape, or form!

 Welcome! I’m an agent/investor. I helped one friend buy a 3 family and the commission paid for the next two years of my license fees.

although I am not actively going out trying to build clientele, I’m more interested in using my license to earn commission on my own investment purchases, and having access to other agents/mls. It’s more of a networking tool for me. It definitely has the opportunity to open up more doors. 

I had this exact situation happen on my first duplex. 

I kept them in there while I renovated the other unit. Gave them a 3 month lease at the same low rent (I knew they couldn’t afford an increase), but I wanted things to be as painless as possible for the term and while I got them out.

Quickly found out that a family of 4 was living in a one bedroom. 

When the lease ended, it took about an extra two weeks to get them out. But I was as cordial as possible because I knew they were waiting for a reason to take advantage. Eventually they left, but took the washer and dryer with them (which I inherited with the purchase as personal property). I asked them if they could bring them back, and the response was “they are mine”.

I basically just said “ok” and moved on. Wasn’t worth the headache. They were gone, there was no way I’d get them back, and if I did I could almost guarantee they’d be broken. I always pick my battles wisely, sometimes it’s worth it and most of the time it’s not. 

You actually have a lot more control over these issues than you think, especially being in real estate. It’s a career where you can create wealth, and control much of what goes on.

Bad tenants & bad business partners can be vetted early on. I’ve actually found it to be more difficult dealing with people at a typical office job! Or go to the construction industry and see how quickly you get fed up with it. 

I don’t know your exact situation so I apologize if I’m not as understanding, but I’ve done the desk job, the construction and project management, and I had a much harder time then.

But to answer your question… my family keeps me going. Because regardless of your line of work, there are tough times. It’s not all about me anymore, and if I can provide stability and freedom for them, then I’ve done my job. And real estate has proven to me that it’s a good way to achieve that. 

Quote from @Joe Villeneuve:

So what.  Your offer shouldn't be based on the AP anyway.  Your offer should be based on the maximum offer your analysis allows within the PV that is determined from your market analysis.  If that's too low for the seller, then the property isn't a deal for you, and you should walk away to the next property.

 Agree 100%, just make an offer on what makes sense to you. Highest and best, based off of numbers that you’re happy with. 

Quote from @Paul C.:

I’m not new to BiggerPockets, but new to investing and being active on the forums (mainly a lurker), and I’m changing that today.

I was able to purchase a SFR back in 2019, and the property has been able to build up some equity since then. I've been floating around the idea of doing a cash out refinance to reinvest in another property. I'm eligible to cash out around $150k and thinking of cashing out just $100k so that the cash flow on the property doesn't take that big of a hit. Is it out of the ordinary to cash out a little more (thinking another $10k-20k) and have it on hand for large, unexpected expenses like new HVAC, roof, etc.? The roof and HVAC will be at the end of their lifespans within the next few years. The property could use a little renovation within the next 5 years as well.

 When doing a cash out refinance, keep in mind you’re paying for closing costs. So that’s a fairly large expense in itself.

I usually use HELOC as a form of accessible reserves. All you're paying is the appraisal fee and then interest only on what you actually use.

I will only do a cash out refi when I already have a property lined up to purchase, and the returns exceed the new mortgage expenses.

Quote from @Jay Hinrichs:

Quote from @Brian Ellis:

Were already seeing about a 10% pull back from list prices and price deductions, in the matter of 2 months.

I dont think a Crash is something to just brush off. Its possible. Keep in mind, 75% of people have that lingering fear from 08' too. In 1929 home values dropped by over 60% in Manhattan. We only saw an 20% decline in 08' so in comparison 08' was nothing like the great depression.

I look at it like this: We had rates in the 2's not that long ago. We are now double where we were. It would be the same as seeing sustained 5% rates all of a sudden jump to 10% over a two month period and seeing house prices reflect that. That is going to really hurt any market. The historically low rates created a massive bubble in both the stock market and housing. Guys, we saw over 100% increase in home values since 2017 (5 year period). You usually dont see that for 20+ years. 

History has shown that a "crash" happened 75 years apart. But history has also shown that we are well beyond the normal appreciation rate. We should have seen rates rise back in 2019, I think the FED fell short and underestimated the world we live in. The pandemic didnt hurt housing, it made it boom. Combine that with extremely low rates, ppp loans, and government hand outs... oh boy

Im not going to fight tooth and nail and argue that it is or isnt going to happen. If its going to happen we'll see it soon. 

 my thought is  its going to depend on who needs to sell as opposed to who wants to sell.  Needs generally are those in financial stress, Divorce death etc  or job relocation. 

wants to sell are   better school district,  bigger house,   smaller house  socio impacts like what is happening in downtown Portland with the riff raff and defund the police has caused I know i have sold about 10 of my new builds to folks who 5 years ago would never have dreamed of selling and moving to the burbs.  but these are discretionary and at a point if folks dont get what they feel they want or need from the sale of their homes they dont move.

NOw for investors with income property same things.. and you can add in burnt out landlord, tenant trashed the place for the 5th time etc etc. as motivation to sell.  Although will be interesting to see MF with 5 year call notes that were done 3 to 5 years ago if that creates some forced sales.

 I agree, but I think employment rates will have the biggest impact. Something to keep a close eye on IMO.

Were already seeing about a 10% pull back from list prices and price deductions, in the matter of 2 months.

I dont think a Crash is something to just brush off. Its possible. Keep in mind, 75% of people have that lingering fear from 08' too. In 1929 home values dropped by over 60% in Manhattan. We only saw an 20% decline in 08' so in comparison 08' was nothing like the great depression.

I look at it like this: We had rates in the 2's not that long ago. We are now double where we were. It would be the same as seeing sustained 5% rates all of a sudden jump to 10% over a two month period and seeing house prices reflect that. That is going to really hurt any market. The historically low rates created a massive bubble in both the stock market and housing. Guys, we saw over 100% increase in home values since 2017 (5 year period). You usually dont see that for 20+ years. 

History has shown that a "crash" happened 75 years apart. But history has also shown that we are well beyond the normal appreciation rate. We should have seen rates rise back in 2019, I think the FED fell short and underestimated the world we live in. The pandemic didnt hurt housing, it made it boom. Combine that with extremely low rates, ppp loans, and government hand outs... oh boy

Im not going to fight tooth and nail and argue that it is or isnt going to happen. If its going to happen we'll see it soon. 

Quote from @Bernard Joseph S.:

Quote from @Brian Ellis:

Quote from @Mike Dymski:

Sounds like you are doing everything that you can, particularly working the deal flow pipeline. Most "I can't find anything" posts come with little to no marketing efforts, which is really what REI is. The good news is that you have a portfolio; so, have benefited from the huge increase in values and rents and artificially low rates...and have experience should opportunities surface. Keep working and expanding the deal flow pipeline...and maybe get a job for a little while...the labor market is on fire and pay is strong.

Ive been doing small side jobs just to put some extra cash in my pocket while I develop my business as an agent/investor. Property maintenance type stuff. 

I know that you do commercial from posts I have seen in the past. You have a big presence here on BP. My goal would be to get into 6+ units, thats really what im looking for. My gut tells me to be patient, and eventually I will land a good commercial deal as long as im actively looking for an opportunity.

 You looking local only or have you expanded the search out of state? I'm rooting for you bigtime, you come across very sincere in your posts.

 Thank you Bernard,

Ive only been looking locally, since I self manage all my properties. I have considered out of state, but im a very low-key type of investor. Not sure if that matters much, but it can be difficult for me to network outside of my town/area.

Quote from @Mike Dymski:

Sounds like you are doing everything that you can, particularly working the deal flow pipeline. Most "I can't find anything" posts come with little to no marketing efforts, which is really what REI is. The good news is that you have a portfolio; so, have benefited from the huge increase in values and rents and artificially low rates...and have experience should opportunities surface. Keep working and expanding the deal flow pipeline...and maybe get a job for a little while...the labor market is on fire and pay is strong.

Ive been doing small side jobs just to put some extra cash in my pocket while I develop my business as an agent/investor. Property maintenance type stuff. 

I know that you do commercial from posts I have seen in the past. You have a big presence here on BP. My goal would be to get into 6+ units, thats really what im looking for. My gut tells me to be patient, and eventually I will land a good commercial deal as long as im actively looking for an opportunity.