All Forum Posts by: Carlos Webel

@Jerry Padilla

Thanks for the feedback Jerry, you clarified some of the points very well. I've used rate and term refinance with Hard Money Lenders before. The problem is that they charge 10%+ Interest rate during the holding of the hard money loan and typically 4 points + in the process, when I add all that up it eats a lot of the meat of the deal, that's why I'm trying to find alternatives. If I refinance within less than 6 months I can recoup the money that I've put in (if ARV supports it) but cannot recoup the money put on rehabbing the unit. If I wait for 6 months seasoning I can recoup everything (if ARV supports it and I have the right lender) but it slows down my acquisition process significantly. I'm trying to think of a creative way of getting both.

Rgds, Carlos    

Derrick,

I don’t buy the properties under LLCs and I’m not planning to do that until I max out my conventional mortgages. Instead I have solid DP3 policies on each one of the properties and an overreaching umbrella policy covering all of them for an amount that is above my exposed assets. This to me is much cheaper than the extra money I’ll pay in interest rates using commercial loans. I still have the same issues you have regarding the seasoning which I’m trying to work around at the moment.

Good Luck  

Dear all,

I’m trying to make a model workout to maximize the quantity and the speed at which I can acquire rental properties in Texas. A typical deal would be structured the following way:

- Purchase Price: 90k$

- Rehab: 10k$

- Closing costs: 3k$

- Total acquisition cost ~103k$

- After Repair Market Value (appraised value) 135k$

- Refinanced amount based on 75% LTV: 135 x 0.75 = 101.25k$

In the example above I end up buying for almost no money down. The intention is to buy the properties cash using a combination of available cash and a stocks backed loan by a local bank and then re-finance them as quick as possible taking out as much cash as possible for the next purchase. The properties are being purchased under my personal name to maximize the use of conventional mortgage loans (10 for myself and 10 for my wife).

As you can see, the intention is to recover almost (or all) all the cash put in on the acquisition to re-invest in the next property as quick as possible. However, most lenders I've talked to will require a seasoning of around 1 year before I can cash out refinance. The ones that will work with immediate refinance will typically just refinance 75% of the purchase price which would be 75% of 90k in the example above, meaning that I can only take out 67.5K$, that means 35k$ down with every acquisition which will put a limit on how many properties we can acquire with the cash we can make available. The other option I have used in the past for 100% (or close to it) financing is to use temporal to permanent loans with hard money lenders, those allow me to get most of the cash out "quick" but they charge a significant amount of money in points and interest rate for the temporary loan making the deal much less attractive.

Buying the properties cash allows me to make the deal lot more attractive because it has less cost associated with it. I'm looking for alternative ideas on how to go around the seasoning requirement to get the money out for the next purchase. One idea that was suggested by a seasoned investor was to form a separate entity (a separate LLC) that will act as my hard money lender. So I can buy the property cash using that entity, that entity will have a note on the property and as such I wouldn't be effectively buying the property cash, allowing me to refinance immediately based on the appraised value of the property. Has anyone around worked out an arrangement like this effectively. Of course, I would only consider it if it's 100% within the legal and ethical boundaries.

Any suggestions are welcome.

Rgds, Carlos

Thanks a lot for the feedback @Dave Foster. That all makes sense.

@Dave Foster  Many thanks for your feedback. Yes, I'm a US Citizen so we should be good on the withholding.

@Robert Hetsler Thanks for the feedback as well. 

One additional question on the mortgage. I was planning to buy the properties cash using the net proceeds from the sale in Florida plus some extra cash from a stocks backed loan with a local bank. I learned today that if I refinance the properties immediately that will be flagged as a second tax free transaction during the year and as such it will 1) trigger an IRA audit and 2) ultimately trigger payment of the taxes. I was recommended not to refinance the properties sooner than 1 year after acquisition. Any comments from your side on that matter?

The second concern that I have is related to the comment on the requirement of having the same or greater mortgage.  As per my current plan I was not intending to have a mortgage on these properties at least for the first year. Your input is highly appreciated. 

Carlos   

Please send me the package on PM

Hi,

Although I have several rental properties, this is the first time I will sell one of them in US. I'm selling a Condo in Florida to invest that capital in Houston. The plan is to set this up as a 1031 Exchange. I'm reaching out to the community for advice regarding the process, referral of people that can help me set this up and to highlight anything that I might be missing. I'll describe the transaction below:

- Selling a 2/2 condo in Miami's Coconut Groove for 297k$ as a cash transaction. Contract executed with the seller already. This property was purchased in 2013 for 227k$, has been cash flowing (~900$/month) as a rental since then.

- The proceeds from the sale will pay the renaming mortgage balance of ~112k$ plus closing costs and realtor fees for a net balance after the sale of ~165k$.

- The seller in Florida selected the closing company, I will have a separate person represent me as my closing agent, however, he worn't deal with the 1031 Exchange part of it

- After selling the condo I will invest in 3 Single Family Residence (3/2) priced around 100k$ each. Note that I source my properties in Houston from local wholesellers and usually the decision to purchase is done within the next 24 hours after the deal is presented. So, I don't have identified the properties I will purchase yet. I understand that as per the rules, I have 45 days after closing to identify the properties and 6 months to buy them, so this will be tight. 

- For the acquisition I'm planning to use the 165k$ net balance after the sale + a separate ~150k$ loan backed by I stock account that I'm just getting worked out with a local bank. The plan is to refinance the properties to get 70 to 75% of the money invested out as quick as possible after the purchase so I can buy more properties.  

Based on the plan above, can you give me your feedback specifically on:

- Are there any glaring omissions or important show stoppers I'm missing 

- For the people that has done similar exchanges (1 property for 3), how have you set this up in the past

- Who should I get in contact with? Real Estate Attorney? Company specialized in 1031 Exchange? The title company of the seller?    

Your advice is highly appreciated. 

Thanks, Carlos   

@Brett Snodgrass ... not good at all back home these days, much safer here in Houston. 

Hi Michelle, Welcome to BP. We have a lot in common, my wife and I are full time engineers with 3 kids living in Cinco Ranch, Katy. We also have 5 rental properties (in Houston, Miami, Turkey and Venezuela) and our main strategy is The BRRR. I can help you with some of your questions. I'm happy to connect and chat for more details via private message. Good luck! Carlos

Hi, I've been a real estate investor on the side for a while. I've got to the point that my wife and I are getting ready to start a formal real estate investing business. Our target is to get to a specific amount of rental properties in the Houston metro area. This month we are working on our business plan and we are looking for recommendations from people that has already been there on how to create a simple but effective business plan for Real Estate. I'm reaching out to the BP community for recommendations and pointers. Any help is appreciated. Rgds, Carlos