All Forum Posts by: Brett Wagner

Quote from @Allan Smith:

I think you are misunderstanding what the rental and Brrr strategy is. This is for investment property, not for a house you live in which is a liability. I would definitely discourage a higher payment.

however, some people will get a line of credit on their house for short-term capital availability. You can purchase an investment and then go get some kind of bank loan after, and then pay back the line of credit.

Thanks Allan.Genuine question… How is my house a liability if I’m able to borrow against it to buy more rentals? Doesn’t that make it an asset? just wanting to understand why it’s different as a primary. I have no idea what interest rates on HELOCS are. I’m locked in at 5.65% right now on a conventional 30yr fixed. 
some more details that may or may not help:
Purchase price: $50k
rehab amount: $30k
interest amounts to $4k
total $84k

appraised value $200k
primary conventional fixed 30 yr. At 5.65%
if I borrow the full 80%, I will net approximately $62K after paying partner back with a monthly PITI $1330
if I borrow minimum (no cash out), monthly payment is $922 (which what we would like as a primary home) but then I’m stuck not being able to move onto the next deal for quite awhile. 
Any more thoughts?

Hi all,

Curious as to your advice on my situation.  I recently bought a sfh with a partner, rehabbed it, and am just about to close on the refinance to pay my partner back. When I refinance I can either borrow just enough to pay him back OR I can borrow up to $62k more to go invest somewhere else. The problem is this: this is my primary home and we aren’t used to making $1300 monthly payments. So I would have some cash to go invest in a fairly difficult market right now with a higher payment than I’m used to having (family of 6, making less than $70k /yr) OR borrow just enough to pay partner back and have a payment that we want to have for our primary residence. What do y’all think?

Quote from @Rick Pozos:

Hey @Brett Wagner if you are just trying to wait a few years to be able to qualify for a loan, maybe you can stay at the 10% with interest only. Make payments monthly for the next year or two. By then you should be able to qualify if you have some issues.

Most people are not going to extend at a lower rate. Make it worthwhile for the lender. At the end of 2 years or 3 years or 5 years, they will get back the same 80k along with all that interest along the way. It will be like a cd for them that pays interest monthly.

Thanks replying Rick. 
I do qualify for a loan but I’m thinking I’ll reduce my costs by extending or modifying the existing loan (rate and term) but without the closing costs of a traditional lender. 

Quote from @Chris Seveney:

@Brett Wagner

You could do this as a loan Modification if the existing mortgage/deed of trust is recorded.

Going long term you may have to pay a higher rate vs lower rate as the investor can get 10% lending short term why lend for longer term less $.

You can try and go lower but also run some numbers at 10%. Also if you do 30 year amortization there is no balloon at end unless you were doing interest only. Again as an investor to me that is not appealing. I would want principal and interest payments and maybe do a 5 or 10 year balloon.

Sounds like you cannot get conventional lending, so I would not try and get greedy here and try and make it a win win.

Thanks for the response. This is the first time my partner has invested in Real Estate and is basically comparing what he gets in returns on the stock market with what I could get him by buying this house. 
I’m thinking that if he is interested I could do the same interest rate that a traditional lender would give me. He gets a principal and interest payment every month for 5 years and then a lump sum at the end. 
I can get a traditional 30 yr fixed mortgage with a lender but if I can get a 5 yr note privately it will cost me a lot less because of no closing costs. And maybe in 5 years the interest rates will come back down and I can refinance with a traditional lender. 
does this make sense?  What else am I missing?

Hi.  I have a question about working with a partner to change the terms of a note. Here’s the details:

Purchased a SFH with partners money, $50,000 purchase price, $30,000 rehab money for a total of $80,000. The terms of the note are 6 months at 10% interest which means at 6 months I'll be paying him back $84,000. The idea is to refinance the property after the rehab in order to pay him back. But I got to thinking… what if I asked him to turn the note into a long term note, maybe 5-10 years at a slightly lower interest rate, amortized over 30 with a balloon at the end. Can you help me think through how to pitch this? What are the upsides for him and what could I do to make it worthwhile for him? Thanks

In case you’re wondering, the after-repair value will be somewhere in the $175k-$200k range and may possibly be either a live-in then flip or a long-term rental. 

Hey Bryce, Jacksonville resident and wannabe RE investor in Jville here. I don’t know of any escrow companies but I can recommend East Texas Title Company. They may do escrow but not sure. 

@Erica Muller

Hey I also would love to see your spreadsheet for analyzing vacation rentals!

@Herndon Davis

@Rob B.

@John Warren

@Mario Am

@Glenna Wood

Thanks for the feedback.  here are some more details:

20% down payment; 20 year mortgage

Gross rents $2150/mo

taxes $1,270/yr (yes that is correct, I quadruple checked)

insurance approximately $3500/yr

utilities covered by tenants except water = $250/mo

Cash flow $158/mo

After all rents are raised (and units are rehabbed) Gross monthly income estimated: $3,800/mo

Cash Flow: $900 (includes extra 10% for property management)

C class neighborhood

currently no tenants have leases (yikes)

I have no cash reserves for updating (my partner has some but he's not sure how much he wants to put in).  The thought was since the place cashflows as is, then every penny we could save we would slowly turn around each apartment one at a time.  We most likely will have to ask 1 tenant to leave since part of his apartment has a roof leak that has not been fixed and I just don't think anyone should be living in it like that (very strong musty odor).  That will be the first apartment to get fixed up.

Owner is not negotiating on price... $130k is lowest he will go.

I believe the owner has some records to show me (like P&L), but not sure if he has exact records of rent or not.  That would be a deal killer for me as I'm not going to take his word for it (I'm sure he's a great guy).

Appreciate all the feedback.  Biting off more than I can chew? No cash reserves may be the biggest red flag (and that's on my side of the transaction).

@Daniel Bradley

there is definitely potential for value-add. Rents on these apartments if fixed up are easily doubled. There is a property management firm nearby that would probably do a good job with it. They cash flow as-is, but due to them not being maintained there are a lot of updates that are needed just to comply with Texas Property Code (safety issues, etc.). I am potentially partnering with someone who has a little experience with REI and possibly extra cash to help with some rehab work. The owner will not budge on price.

My thinking was that I have about $70k in equity that I could use to buy a different complex in better shape and better managed and would provide quicker NOI. The 6 unit would be about 5 years till all 6 units are fixed up and rents are fully raised to market value. I don't think I want to sell my house to rehab the apartments.