All Forum Posts by: Carlos Valencia

Hello Eric, 

When you say you are interested in multifamily investing are you referring to 5 plus units or just in the 2-4 space? I'm asking because many people easily confuse the two. If you are interested in investing in 2-4 units one strategy many people use is House Hacking where you buy the property as owner occupied with low down payment. Live in one of the units and rent the rest. After 12 months you are eligible to move out and do the same strategy on your next property. Rinse and repeat. But if you are looking into multi units of 5 plus thats out of my wheel house. I have heard many different strategies for those an one common one is going into a syndication with other investors. All that means is everyone puts money into the deal to buy this 5 plus apartment building and split the net profit if any. Many people have also just bought on their own as well. One last thing when looking into 5 plus units you will be in the commercial lending space. 

@Albert Bui @Matthew Kwan

Hello Raphael, 

Its best to use Hard money for fix and flips until you can grow your bank roll. Flipping can look very appealing but in the beginning be ready to make many mistakes unless you are partnering up with an experience flipper. In most cases many beginners do so their risk is low. If you have the 50k you can maybe even use that to partner up with an experienced flipper and put some of that money in the deal as many want you to also have some skin in the game. Once you become an experience flipper you can also get better terms when it comes to hard money especially when you stick to using your regular lender. If you show consistency in bringing good deals and your a good investor they will know your a very low risk so they will cater to you with better terms. In the beginning since they don't know what your capable of it will be costly to use Hard Money. This is why its best to partner up with an experienced flipper as they will already have that track record to get better terms. 

Using others peoples money works too but keep in mind you will have the investors calling you everyday asking about where there is money is at and when do they expect their return. When flipping there's many things that can come up out of your control that can prolong your progress and therefore your investors might begin to get impatient with getting their return. Pick your heat right other peoples money or Hard Money lenders there's pros and cons on using each. Which one do you think is best for you? 

@Albert Bui @Matthew Kwan

Hi Palmer, 

Usually people take out Helocs to have the money readily available for the next deal. Helocs are typically in second position. Its best to do a cash out refi using DSCR. If you think you will need 100k just pull out 100k because like you mentioned you will end up paying more fees to do this 2X. Hopefully you do not have to sit on that money too long. As I'm sure you want your money to continue working for you. A cash out refi is also more cost effective when it comes to rate than a Heloc.

@Albert Bui @Matthew Kwan

Hi Kyle, 

Yeah the only option is to refinance into another DSCR loan. Rates have improved for these loan products as well. Many lenders are at about low to high 7's. You can save a full 1% or more depending on your scenario. If you are self employed you can also look at bank statement loans assuming you have a business with high deposits. These product looks at your deposits from your business and calculates your income that way.

@Albert Bui

Hello Sam, 

Its really going to depend on how much net income you need to live off plus a little extra for emergencies or entertainment. Find that number out first and try to give yourself a buffer since cost of living will still go up but also will your rents and expenses. Once you figure that number out you can determined how much net rental income you will need. Therefore the number of properties will depend on that figure. Focus on the overall cashflow because maybe for you it only takes 10 properties to retire and for others maybe 20 some might need 5 it all depends on how their portfolio is performing. 

@Albert Bui @Matthew Kwan

yes there's many programs you can use DSCR, or conventional. They will just use the market rents form the appraiser and you will need to have reserves 6-12 months. Even if the property is already rented out.

Hello Brian, 

Personally I would wait to save more because you want to have the flexibility when you buy your first investment. The good thing is that rates have slowly started to drop. Allowing you to borrow money at a cheaper cost. In order to qualify for your first investment loan you will need to put down 25% of the properties purchase price. Hence why 15k wont get you too far unless the properties your looking at are 100k and below but even at 100k you still need 25k so your 10k short. Plus you will need money for closing cost as well. 

I know you mentioned you do not want to live in the property. But what many new investors do in order to buy with low down payment is they buy it as primary so they can acquire with 3-5% down. If you can deal with living there for 12 months then move out with your family afterwards then you are good as you just acquired your first rental property. Just make sure that when doing this house hacking strategy that you run the numbers to make sure you will cash flow or at the very least break even upon moving out. You don't want to get yourself in a situation where you have to cover part of the monthly mortgage every month otherwise how will you get to travel and live the investor life right? 

You mentioned you want to travel while renting out this property. Is your job remote or do you think that just having one rental property will be enough to retire and live the retired life? If this is your goal to live off of rental income you will need to acquire many properties until you reach your overall goal of making enough off rents that will cover all of your living expenses plus a little extra for fun stuff. Just stuff to think about when beginning your journey. This will be a long term game plan. Be patient and last tip is to keep your active income as long as you can and try to continue to increase that active income every year as that will help you grow your rental portfolio much faster and live below your means. 

@Albert Bui @Matthew Kwan

Hello Elwin, 

If its free and clear you should just do a cash out refi. It will be a more cost effective rate than a Heloc. Helocs are almost like hard money rates lol. HElocs are prime 8.50% plus 2-3% depending on the Heloc product you use. Refis are more in the 7-8s for investments. 

@Albert Bui @Matthew Kwan

Hello Felicia, 

The good news is that rates have started to come down a bit so that can help your cashflow a little more. Typically if you put 25% down you do get better rate assuming you have a 760 or better fico. Not sure what market your in but if you can find something that you can potentially at the very least break even then that's a win in this market. What you don't want is to be negative even if its $100 unless you have a plan where you know that the appreciation will help offset that negative rent or you know you can squeeze out more juice in the near future by adding more value to the property later. If you have more than 25% down and you know that you can use the rest of the money you have to help you fix the property or invest it in another asset where the money will continue to grow then by all means go for it. Keep in mind that when you invest all of your capital into one property that money will be stuck there until you can cash out refi or sell the property. 

If you are ok living with roommates another option is house hacking where you buy a property as a primary and rent out the rest of the property then move out after 12 months to acquire your next one. The great thing about this strategy is that you can put as little as 3-5% down allowing you to keep more of your cash in your pocket and still get a lower rate. If you played your cards right you may even cashflow upon moving out because you will now rent the space your were living in. There's many paths to grow your real estate portfolio just make sure you pick the one that is right for you and remember this real estate game is a long term investment. 

@Albert Bui @Matthew Kwan

Hello Ian, 

Using a Heloc to purchase your next investment is not a problem. Some lenders allow you to go up to 90% combined loan to value meaning whatever your balance on your first mortgage is plus the equity loan can go up to 90% of your homes value. Example if you owe 300k and your home is valued at 600k you can only borrow up to 90% of the 600k value. 540k is 90% of 600k. If your balance is 300k then that means you can take a line of credit of about 240k on your property. Depending on the type of Heloc you get its interest only payment for the first 3, 5 or 10 years then the remaining time will be a payment of principal and interest. 

Heloc is a full documentation loan meaning that they will verify your income and credit. Just because you may have enough equity to go up to 240k doesn't mean you will be able to access it all because what if you can only qualify for 100k. The next factor is since you are looking to use that towards a down payment for your next investment you will need at least 20-25% down payment. Make sure to do your due diligence when acquiring your next property as you will need to make sure the rents can cover your mortgage payment. Any negative balance will go against your DTI when qualifying for the investment loan. Lender only uses 75% of your rents to offset the mortgage payment with taxes and insurance.

Take aways here are to make sure you have a high active income to be able to use this strategy. Not sure what market you are in but if its in an expensive market you will need a really high income to proceed. Make sure to plan ahead and speak to an investor friendly lender that can help you look ahead at potential roadblocks and how to avoid them or overcome them before getting your self into a sticky situation. 

@Albert Bui @Matthew Kwan