All Forum Posts by: Calvin Thomas

Hi, I recently got a quote for a cash out refi at a 5.1% rate which is better than my 6.625% that i currently have. After closing costs I’ll have $78,000 to re-invest. The downside is they want $30,000 in closing costs. Is this a good idea as it will lead into scaling my portfolio faster or is this too much to pay in closing costs?

Are you pre-paying points? $30k in closing costs is pricey.

0 Votes

Saint Paul, Minnesota

Quote from @Gp G.:

Hi,

Any Markets still follow 2% rule for rental properties that are in decent location, decent rents.. Which market allows this so that I can make more cash flow. Most of the markets I see following less than 1% rule like 0.5% rule like If I purchase for 100k getting rent around 500$ a month which gives no cash flow after mortgage, insurance, maintenance, property manager. Please advise

Possibly. Have you checked the real estate options on the Moon or Mars?

2 Votes

Quote from @Noah Wright:

Quote from @Matthew Tyson:

Just trying to get a gauge on current DSCR loan rates. Curious what those who are looking at BRRRR refi's are getting quoted at, all things being equal.

6-7% best case

7-8% base case

9-10% worst case

beyond that we move to bridge/hardmoney options

9-10% best case

11-12% base case

12-14% worst case

17% SOS Emergency (avoid imminent insolvency, worst day of borrowers life, etc...)

Speaking broadly, of course

At those higher rates, what's the point?

0 Votes

Quote from @Chris Seveney:

Quote from @James Wise:

I've been on these Forums for well over a decade and I've got to tell ya'll that there is a serious culture problem among "investors" around here. This morning I read a reply from a new investor in another thread called FlipSystem by Antoine Martel that is the zeitgeist of this cultural problem among investors around here.

Irrelevant to the topic of that thread being about FlipSystem and Antoine Martel, I want to focus on the set of balls and lack of shame on the poster for the way he treated the Real Estate Agent that he hired. Perfect example of entitlement, lack of accountability for his own actions, and the shameless way he had no problem hiring someone to do a job and then not paying them for said job. This kind of behavior is a problem and seems all too common among investors around here.

For some reason new investors think they can come on here and trash every Agent, Property Manager, Contractor, Lender, Title Company etc.... and then they can operate with impunity while stealing time and money from them. The lack of respect for people "working" as service providers in the real estate industry is nuts.

Below is his post in full and my original response to it............

Thoughts??????

________

Max Schulman

Investor
Cincinnati, OH

Replied about 2 hours ago

@Jay Hinrichs. And all. Just wanted to finally write the post I said I would after I completed my one and only retail flip through flipsystem.

Unfortunately for me, Jay, you were right. Retail flipping homes is high risk.

Recap - I joined FS in 2023 with intent to flip many and generate more $ to invest with. started in cleveland market with no luck and switched to cincinnati market (where I live).

Bought off market 3/2 cape cod for $102k in cash 10/2023. Seller wouldnt turn on Utilities so couldnt check major items. Rehab estimated at $63K. ARV of $210-$215k. So it appeared to be a solid deal.

Well, there were many costs that just piled up over the rehab timing. like, drain lines that needed clearing, a water leak, having to switch to a 3/1.5 due to the odd layout. replacing AC unit (not factored into above rehab number), replacing Furnace (not factored), replacing roof) not factored, demoing and painting basement (not factored).

Time also played a factor as the contractor was not good. Lucky though for me I am local and could go over and check all items after complete. I had to tell him many times to fix items.

Rehab started OCT but didn't finish until JUNE 8 mo later! GC said 4 months initially.

By June i'm at $183k spent. I used HELOC so interest only payments continue.

Staged and listed and got a Ton of attention. Excitement was high. Accepted offer for asking $210K. Inspection back with whole slew of items. Buyer wanted $15k in items/credits, I denied as there was so much attention I thought for sure I could find a better offer. Back on market and lots of showings but no offers until mid July (cash institutional buyer) Offer of $204K but they wanted $20K in reduction after inspection.

Meanwhile I replaced roof (many buyers kept mentioning it so vs doing credit for same amount I just replaced) so total spend up to $188k with HELOC juice and half year tax payment.

More showings, dropped list price to $204K , no offers until 10/2024, $204K but again wanted many repairs and the aluminum branch wiring was the exit reason due to "insurance".

At this point I am not happy with agent (Do not recommend Howard Hannah) and I ask to release contract as I need to drop price and their commission is keeping me from profit. Well, they said sorry bud you signed a 12MO contract (lesson again learned to not ever signed an agent contract for 12mo) and they wouldnt release me so I just rode it out until contract was over.

I list FSBO in JAN 2025 through Homecoin(great site) $179500 offer came in a few days after list for list. Inspection requests were minimal but they wanted closing costs paid so it went through and sold in FEB.

All in $190K and came home with $165K. So $25K lesson learned. (I did not want to BRRRR or sell turnkey I just wanted out as I was afraid the bad rehab was going to cost me long run)

After all this, If I could have advised my self before getting into flipsystem, I would have said, Do not do this. I would have said, go to your local Real estate chapter and ask the leaders who in the group is the best at what you are trying to do in your area. Connect with that person or persons and offer to pay them to learn it all or try your best to learn from the RE meetings. They might offer up the knowledge for less than you'd think. I do get it thought that the point of FS is to not have to do any of that (education, finding people, finding teams, vetting teams, etc) and just have it done for you asap.

What do I think of Flipsystem? The education and calls were good, the team they told me to "trust" in my market was bad. Maybe it's just me and my experience in Cincinnati though as I cant say anything about the teams in other markets. I do see though, if the teams were better in my market FS would be a good program.

Did I take on too big a project for my first retail flip? I think so, but the FS team led me to believe I could make it happen.

Did I learn valuable lessons, absolutely. Should I have listened to @Jay Hinrichs absolutely LOL.

________

James Wise

#4 All Forums Contributor

Real Estate Broker
Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH

Replied 16 minutes ago

Opinions on the Flip System program aside, it's pretty wild to me that you have no shame in working that Howard Hannah Agent as hard as you did without paying them a penny even though they got you a ton of interest and multiple offers. Seems like the only reason the deal didn't close is because you were too cheap to do a proper rehab. Then you have the balls to trash them and try to weasel out of your contract with them. This type of bush league behavior needs to be called out for the trash that it is.

So the way I read this was this person bought a property without having utilities turned on to do a thorough inspection (mistake #1), poorly managed the contractor or went on the cheap and did not perform proper repairs to get it to its value (Mistake #2), blames the agent on this when they brought in offers around asking but due to not fixing the property buyers wanted credits (mistake #3 not accepting offer)- and its the agent, the flip system and everyone elses fault?

I'll be honest with you. Most of the "home inspectors" are useless. I can tour a property and just pick out the issues with my eyes, Nine times out of ten is a poorly or not corrected fixed moisture or plumbing issue. Roofs and windows are other big issues. It's best to hire a good GC and walk the property with you.

1 Vote

Quote from @Andrew Syrios:

Quote from @Jay Hinrichs:

Quote from @Nicholas L.:

@James Wise

agree with you, and I think it comes down to new folks thinking they're paying for an OUTCOME, when they're actually paying for a SERVICE. as you well know, a PM can do a great job, abide by their contract, and still a tenant relationship can go bad and result in a rough turnover or an eviction. having a bad tenant or a tenante that starts out great and then stops paying doesn't mean the PM did anything wrong. the question to ask is... did the PM abide by the contract? not - what was the outcome?

with that said... i do think there is a lot of cheerleading in the forums that makes it seem like new investors will get OUTCOMES rather than SERVICES.

I like this Outcome vs service. and given the fact that so many different individuals touch a rehab and then a rental its hard to control out come of all these different folks and service providers. thinking someone can put this all in a can and all you have to do is open the can and warm it up. not quite reality

Maybe BiggerPockets should place an automatic disclaimer saying something like this for any guru-type post about being either a mentorship program "guaranteed" to make you millions or some one-stop-shop turnkey operator. Maybe also note that many of these are just outright scams.

Here's a crazy idea. Stop promoting them...

0 Votes

Quote from @Joe Villeneuve:

Quote from @Calvin Thomas:

Quote from @Joe Villeneuve:

Quote from @Calvin Thomas:

Quote from @Joe Villeneuve:

Quote from @Calvin Thomas:

Quote from @Joe Villeneuve:

Quote from @Calvin Thomas:

Quote from @Joe Villeneuve:

Quote from @Stetson Oates:

Quote from @Joe Villeneuve:

Quote from @Stetson Oates:

Quote from @Joe Villeneuve:

Quote from @JM Edward:

@Joe Villeneuve that's a different way to look at it! I thought I was on the right track when @Chris Seveney validated my point, but everything can be seen multiple ways which is what makes these things so tricky. I feel all-cash is less risk because unless the market goes way down I can still likely get most if not all my principal back, even in a half done rehab(?).

As you see it, the lender is taking some of your risk away, but how does that work if there is a loss on the project? The lender takes the title and you lose your down payment and rehab costs? And you end up with a credit record that prevents you from taking out (decent) loans for the next many years? That sounds like more of a nightmare scenario than losing some principal, but I don't think I'm as educated on what this would look like and why you think it would be a better scenario. Can you say more?

If the project loses value, the it doesn't matter unless you have to sell the property. IF the property still cash flows, you can ride it out until the property regains its loss.
Risk is based on 3 parts:
1 - What is at risk. This is ALWAYS the cash that was put into the deal.
2 - Who is at risk. See above. This is the person that put in the cash. When you buy all cash, you are taking on 100% of the risk. When you put 20% down, you are only taking 20% of the risk, and the lender is taking 80%.
3 - Who is the risk. this is the person/entity that is responsible for keeping the investment a good investment. This is the REI. This means the person who is AT risk the most, is the person that put the most cash into the deal, and they are relying on the person who is THE risk to keep their cash safe. So, the person who puts the least amount of risk (cash) into the deal, is the person sho has the least amount of risk.

While I see the point you are trying to make, I couldn't disagree more. You can't measure risk in dollar amounts only. If you default on a loan, you will suffer much more than just dollars lost. Reputation carries a hefty value; you can't just loose investor/bank money and wash your hands of it. You can't just go to the next deal. Your investment career is likely over, especially if it's a loan from a bank. I take that risk very seriously and operate a low LTV because of it.

Fear and lack of risk controls are not the way to invest. Of course foreclosure is going to damage you. One foreclosure isn't going to damage you. There are too many ways to get financing to get hurt by it. Legal action, from things having nothing to do with the property directly, is always there. Foreclosure risk isn't if you set the deal up properly and it's based on accurate analysis.
On the other hand, the greatest risk will always be what you have to risk...which is your cash in any deal. You are either risking the small DP, or all cash. This also impacts legal action. A property with 100% equity is a target, one with 20% isn't,...or is at least a very small target.
On top of that, the cash you put into a positive cash flow property is what the REI pays for that property. When you put up 20%, that's what you are paying for it. When you pay 100% cash, then you are paying full price.
Plus, 20% down means you are buying 5 times as much value compared to paying full price in cash. So, a 5% appreciation generates 5 times the equity increase as well,...and that's exponentially gained on future appreciations.

Using debt responsibly is a good strategy and necessary in most cases if you want to scale. However, debt can be the silver bullet to an investor if not done responsibly. When I was an underwriter and lender, a foreclosure killed the deal. Those are very hard to overcome and would require you going off market for financing for at least 5-10 years before any financial institution would look at you again. Of course, debt allows an investor to scale quicker and take advantage of appreciation on a larger scale but running a risk analysis on who's making loan payments when the SHTF is a useful exercise.

While your assessment of debt vs no debt risk holds water when it comes to litigation, an LLC with an insurance policy and an umbrella sets up a good defense. As well as being in a state with charging order protection.

LLC, insurance (doesn't stop litigation), doesn't stop litigation. They can help you win, but not stop it. Debt stops it in its tracks since the only prize of winning is a limited equity, which is sucked up by the lawyer.
As I stated above. Foreclosures delay traditional financing, until the REI can show a positive track record after the foreclosure. There are many more ways to finance properties, not involving traditional financing, where a foreclosure shouldn't impact it negatively. These other ways will show positive results to a lender, and help to stop the foreclosure from stopping traditional financing.

So you only recommend holding a mort. for liability concern? What sense does that make? You would rather pay 6%+ than have a paid off property? You do realize, unless the LLC is owned by two members or more, it's not very hard to pierce the LLC veil and go after the owners.

In my humble opinion, this makes little sense. Get a good insurance policy and an umbrella, and most should be fine.

I'm not holding a mortgage for liability sake. I'm holding it so I don't have to pay full price for a property. Yes, you have to have at least 2 members or an LLC can easily be pierced. I said an LLC and insurance doesn't prevent a lawsuit. What a loan will prevent is a lawsuit, in most cases, because there's little equity to go after. Insurance actually attracts a lawsuit, since the person suing knows there's money to be had.

You know, just because a lien isn't filed with the county, doesn't mean there isn't a lien on a property. I do not see the sense in paying 6%+ to a bank on the off chance I get sued. The logic doesn't compute for me; but maybe I am old and senile.

HaHa. Well, then these are a couple of old senile twins having a discussion. The leverage discussion is separate from the getting sued side. The loan isn't in place because it prevents a lawsuit. It's in place because I want to pay less for the property, and allows me to buy 5 times the total property value. Appreciation applied to 5 properties will generate a much higher total equity increase than just one. The idea it takes away the property as a target because it reduces the equity is another topic, as a bonus, but not the main goal. It's a bonus.

Fair enough and I understand. At least for me, I've been working deleveraging our assets. I place the HELOCs on the properties in case I want to make a cash offer on another investment and build up cash reserves.

At one point, I had over 24 million in loans outstanding. I'm at the point of deleveraging and less risk. I still believe that good insurance and a large umbrella is the best protection. But there really isn't any wrong or right way here. It's personal preference.

That's a lot of debt. I'd be working to eliminate that much too, one way or another.

A lot of properties. It's down to a couple of million now. I have two other apartment buildings mature in 2030. 10 year balloon at 3.5%. Cash in reserves to pay it off; unless something else come by to acquire. Real life Monopoly can be fun; but stressful at times.

Monopoly is what it is. I tell my students there are only two reasons to go into REI:
1 - Financial. Pay off personal debt, and have cash flow to pay all your monthly bills.
2 - To have fun.

Fun. Hmm. When you have a dozens of properties, it's more of a constant headache. I have the maintenance team handle everything, but I am notified by our system of every support request and tenant issue.

Fun would be selling everything, place the 8 figure proceeds in t-bills and bonds and relax. However, the downside would be a massive tax bill and me being bored. There are worse problems...

1 Vote

Quote from @Hector Espinosa:

Let’s say you’re starting from zero in 2025—no properties, no deals, just the knowledge and lessons you’ve picked from BiggerPockets, books you have read and videos you have watched.

What would you do differently this time around?

I understand that everyone has unique goals, and responses will vary depending on those objectives. However, your answer could include, but is not limited to:

Market Focus: Would you stick to cash-flow-heavy areas, chase appreciation, or go after niche markets like short-term rentals?
Property Type: Multi-family? Single-family? Commercial? Maybe something unconventional like storage units or mobile home parks?
Financing: Would you try creative strategies like seller financing, BRRRR, or syndications, or stick with traditional loans?
Avoiding Mistakes: What’s the one thing you wish you could go back and tell your beginner self?
Leverage Tech: What apps, tools, or platforms would you use to streamline your daily activities?

In my case, living in a high-cost area, I’m looking for out-of-state investment and focused on multi-family (duplex,triplex and quadruplex) but open to single family homes too. Because of this, I have been meeting with different people in different areas and building a team which helps me to find and buy my first property although it hasn't been easy. Looking for cash-flow properties is hard these days and even when I have found a couple I feel is not worth the risk. Most of the properties I have found cash-flow <3000 per year. Well, if I could have 50 that cash 3k per year wouldn’t be that bad but as a starting point I feel I should wait a little bit more. I could be wrong and any feedback is welcomed. As a side note, most of the properties I have been targeting were Neighborhood grade C which are quite old and one of my concerns is that I may need to spend a lot of money on repairs and maintenance.

I feel that I would need to wait a little bit more and maybe save more for my down payment and try to target Neighborhoods grade B.

I'm trying to do an FHA loan and buy a house in my local market but even when I'm targeting properties between < 600,000 (which would be a 2Bed, 2 Ba in a good condition), my monthly payment would be around 5,000 which is impossible to pay for me.

So, it has not been easy and it won’t be but I’ll keep looking until I find one property that meets my requirements and helps me to achieve my goals. Then, I’ll start the process for the second one, and so on…

What about you? Whether you’re just starting out or you’ve done dozens of deals, I’d love to hear your perspective. What’s your 2025 starting-from-scratch game plan?

Looking forward to hearing your thoughts and insights.

If You Were to Start Investing from Scratch in 2025, What Would You Do Differently?

Become a real estate agent and learn the game.

0 Votes

Quote from @Steve Bob:

I am starting out in real estate, I’d like to hear which approach would be smarter:

Use $50K–$100K in cash to fully buy lower-priced houses (likely in rougher neighborhoods but already rented out), then wait 6–12 months for some appreciation and refinance to pull cash out and buy another similar property?
OR
Use that same cash as a down payment toward a $400K–$500K house in a better neighborhood with better property quality from the start?

Which path would be better for long-term growth and scaling up a real estate portfolio?

Depends. That's how I started decades ago. Different times and lower prices. Now, you have higher prices, higher interest rates and more tenant protections. If you are in rough areas, you tend to have more damage and more evictions. It's just the nature of the beast.

It would be better to find the ugliest house in a good neighborhood rather than the most beautiful house in the crappiest neighborhood. Trust when I say, it's not worth the stress and headaches.

0 Votes