All Forum Posts by: Brendan Miller

Hi @Adrian Hildebrand, I would treat my HELOC payment as an expense on my rental property and treat the payment as debt service, therefore I'd use the cash flow from the rental to pay for it. It's normally good practice to manage your rental property finances separate from your personal finances, so that's how I'd approach it. I don't know if there really is a right or a wrong answer though, but I think the approach I just explained is the cleanest in my opinion.

@Dominic Kosteris

I’m following the Phoenix, AZ and Albuquerque, NM markets and both are very hot markets with very low inventory still. Most homes go pending in a few days and sell above asking. No signs of slowing until supply catches up with demand.

@Sue Chen

Aside from the responses already provided, I’d also evaluate how they are as a tenant and whether you want to disrupt the relationship. If they are a good tenant that you would want to keep in your unit, then I’d normally go out of my way to make sure they’re happy. In this case I wouldn’t have gone as far as paying for their hotel if the unit is habitable, so it looks like you made a good call in my opinion.

@Ali Kattan I don't have any experience with land contracts, so I can't speak to that, however related to your cash out refi question I'd say it depends on your current vs future cash flow numbers on the property to understand if it's a smart investment. If you can still cash flow positively following the cashout refi (after factoring in all expenses; PITI, vacancy, maintenance, capex, property mgmt, etc) then I'd say do what you want with the money. If the new cash out refi loan amount results in you no longer being cashflow positive, then I'd rethink that play. Regarding the cashout refi, you'll likely only be able to do a max 75% LTV since it's an investment property, so assuming the property actually appraises at 130K x 75% = $97,500 - $60,000, you'll be left with $37,500 - closing costs (couple thousand $ depending on the lender and points charged), so you'll likely end up around the <$35K range.

@Jayden Hamilton congrats, you're in an awesome position to be in so young! Ultimately it depends on what your long term goals are and your risk tolerance. 

Below are some options:

1) I'm assuming you live in either the duplex or SFH? - if so, (and assuming you've lived there more than one year), I'd find another MFH (2-4 units) to purchase with an owner-occupied loan and use part of the $100,000 for a down payment. You could rent out your current place as long as it cash flows.

2) You could either cash-out refi or put a HELOC on your SFH, up to an LTV % of your comfort level. Since it's an investment property, the max you'd be able to get is 75% LTV, or $120K - $130,000 depending on what the appraisal comes back at. With that money you'd be able to smartly scale your portfolio with a few more properties that cash flow well.

3) Make sure you have a solid reserves fund set aside within that $100,000, both a personal reserves and reserves for your rental properties. The personal reserves would cover unforeseen personal situations (lost job, medical emergency, etc). The property reserves would cover unforeseen repairs, damage, vacancy, capex expenses (new roof, A/C, etc). I normally have 6 months of expenses in my reserve account for rental properties, however this amount or value properly varies widely amongst investors.

4) Take your time, and grow smartly - I'm in a similar situation right now where I have a large amount of cash that I'd like to redeploy into additional properties. You will have the urge to pull the trigger on properties quicker in order to get your money working for you. The key is to know what your criteria is, and not adjust your criteria to purchase a property just because you have the money to do so.

5) Find a mentor - you're in a better position than 95% of the investors on here when they started, but you still have a lot left to learn, so try to find something that you admire within the real estate investing and try to learn from their mistakes to avoid you making your own. Also try to participate in your local REIA events or BP meet-ups.

Hope this helps, congrats again, you have a solid base to build your investment career from!

If you have existing properties with enough equity in them, you can do HELOCs on them, however that's not a quick process (likely 1-2 months before you get the cash). The quicker option would be to find a hard money lender or private lender (friend or family member).

@Auryana Faramarzi I personally wouldn’t do the deal based on the cash flow, there are better deals out there still even in this market. I also didn’t see Property Management detailed in your costs although you mentioned you lived out of state, so that may be another cost to consider. Since there isn’t much cash flow, you’d just need to be prepared to fund any unforeseen issues out of your own personal income cash flow. Normally when you’re having to do that it means it’s not a great investment unless you’re expecting large appreciation (which isn’t a guarantee).

@Ethan A Karnes

Hi Ethan, I live in Gilbert, and I know parts of the Mesa market but not all of the Mesa areas very well. As for house hacking options, it's a tough market to get into right now due to price and competition but there are still opportunities out there for house hacking strategies. Below are some options that I'd look into.

Strategy 1 - MFH (2-4 units)

Ideally I'd recommend trying to find a multi-family property (2-4 units) to owner-occupy. You can live in one unit and rent out the others. There are a few on the market in the central/west Mesa areas, but they are older age homes but come at lower price ranges. You can purchase this on a low down payment FHA or Conventional residential loan

Strategy 2 - SFH Fixer Upper

The other option with house hacking would be to find an outdated SFH to live in and fix up over the years. You can purchase this on a low down payment FHA or Conventional loan. You can live there for at least 1 year (or whatever your loan requirements dictate), and then do it again and rent that property out. The other option in this strategy (which I just recently used), is live in the unit for 2 years, rent it out for 3 additional years, and then sell before the end of year 5 in order to avoid capital gains on the appreciation.

Feel free to reach out if you have questions, I'm happy to help.

@NIcholas Hamel I'd look at both options of either a cashout refi or a HELOC. With the cashout refi you'll pay lender closing costs which could be $5K+ depending on the loan amount, but with the HELOC there shouldn't be any costs if you find the right HELOC lender. The interest rate will be lower with the cashout refi than the HELOC though. You can get a HELOC up to 90% LTV on a primary residence with some lenders (PenFed Credit Union for example), but the rate increases as the LTV % increases. I would run numbers on both options and then evaluate which option is best for you. As for whether you should use equity to purchase more property, I would just look at the opportunity cost of that money and the potential deal you're buying. If you have a 3-4% loan on the equity, but can make 8%+ CoC return from cash flow plus all of the other benefits of real estate (appreciation, tax advantages, loan paydown), then I'd say go for it. If you're buying it just to say you own another property but it doesn't cashflow, then I'd probably say it's not a great idea. Congrats on buying your first rental property, that's a huge first step!

@Matt Fisher I agree with @Mike Kostner, give your friend a finder's fee similar to what you'd pay a wholesaler who brings you the deal. I'm not sure what conversations or expectations that you've set with this friend so far in your discussions, but it sounds like they don't have a lot of money to participate in the deal themselves, so they'd likely be very happy with a ~$5K finder's fee. You could still include him in the ongoing management and or renovations outside of the deal if you'd like, but you could just agree on separate values for those items and that way you have the flexibility to down the road if the business relationship doesn't work out between you both.