All Forum Posts by: Chan Park

Thank you everyone for your advice. I can see the two months' rent upfront is a win, and I definitely want to keep my word. 

Just like the title, my tenant bought a house and plans to move out at the end of the month. Long story short, we have a lease until 05/23. He and his family have been GREAT tenants. Upon renewing our annual lease, he brought up a concern that he could purchase a house in the near future, and I plainly said, "I wouldn't hold you and keep you if you're going to purchase a house." Now just six months into our lease, he notified me that he plans to purchase a house, and will close by the end of the month. 

My question is: "my tenant is willing to give me 200% of rent upfront for breaking the lease early vs. should I make sure he is responsible for payments until I find new tenants? FYI the property sits in a desirable area close to Tesla Gigafactory in Austin, TX. I'm guessing it shouldn't take two full months to rent out the property. Should I take the 200% of the rent upfront or make sure I cover my back and keep him accountable for the lease until I find new tenants? Thank you for your feedback. 
 

@Malcomb Stapel Thanks for your take on it. I did look into HELOC as well but I do like the fixed rate with cash out refi. I'll definitely look into it

Hi BP community, I have been watching and listening to podcasts and youtube videos from BP consistently but I still feel stuck where I am, and so I am asking for your input as to what I need to look into or suggest books I should read. 

The last two-year run has been amazing for my family as we now have 3 SFHs in Austin, TX. Two SFH are being rented out and cash flowing very well since we bought them during the first wave of COVID. One of them is a secondary home and the other is an investment home. They have about 175k and 290k of equity, respectively. Our 3rd house will be a primary home and is a new build scheduled to be finished by end of this year.

I am a vet, so I am thinking about using the VA loan for the first time, but I'm still planning to put down 20% for the primary home. My ultimate goal is cash flow so I want to look at multi-family. For my next project (after closing our primary home), should I use my VA loan on this property instead and cashout refi on our investment/secondary property? I have never cashed out refi yet, so how will that affect my current cash flow?

Thanks for your input! 

Just to cap this forum, I want to thank each of those who participated and have given me sound advice to quickly get my tenants out and move on to new tenants.

Long story short, my previous tenants have moved out by the end of last November and I swiftly made the property rent ready (they left the property in VERY clean condition) within a matter of days and it was back in the market. 

During a period of three weeks that my property was on Zillow, I had so many people asking about the property including those with criminal history, good income but bad credit, and etc. As more and more days passed it became tempting to just with a C+ or B- tenant, but patience eventually paid off well. I found a very solid family who had very high credit score and high income earners. 

These last couple of months have been a learning and challenging time, and I'm glad to have the Biggerpockets community and their wisdom to go through it. Thanks! 

In response to many of you whether I screened the tenants, the answer is “no.” I’m currently in CA while the property is in TX. And I relied on my sister-in-law (who also owns many rentals) screened them for me and even had a lease agreement that I didn’t really cover many things written up and sent it over. I used Brandon Turner’s landlord guidelines for my other property.

Nonetheless, it’s a rookie mistake and is one I’ll never try to repeat. I will get the eviction process going.

But my real practical question is, “how and when do I start the eviction process when I have the last month check that I got upfront?” Is it after the grace period? Which is the 6th according to our lease agreement. 

This has been an ongoing issue since the beginning and I'm learning the hard way to screen tenants properly. A family began to rent our newly built house in June and after about a month, the wife had been diagnosed with a serious medical condition. Getting rents on time was rough but we managed to get all the rents so far. 

I received a phone call today from them and let me know that the husband got laid off and there are more medical bills to pay.. and a lot of sad stories. And that they aren't able to pay the whole amount on the 1st. 

I did receive a total of 2 months worth of rent upfront (1 month security deposit + 1 month rent). I'm trying to understand their sad situation but at the same time, there are bills to pay. 

I'm reading our lease agreement and there isn't a specific area regarding breaking the lease. I want them to use the last month rent that they paid in the beginning and leave and find a new place at the end of November. 

Any sound advice from seasoned landlords would be greatly appreciated. 

@Chris Wharton

I was in the process of establishing an LLC and my lender noted most lenders will not loan to LLCs, including HELOC and cashout refi.

After speaking with a lender, they provided two options - a HELOC and a balloon loan. I have never heard of anyone doing a balloon loan on a residential loan. I thought it existed only on commercial loan side.

These are some key points he said:

Balloon loan needs to be in the first position, so I will have to refi the existing loan that I have, which is 260k at 3.5%. Adding 35k (how much I need), I will get a 295k loan at roughly 4.1-4.2% at 30 year amortization and 10 year balloon, meaning at the end of 10 years, I will either have to pay the remaining balance, or refi again at that point.

Has anyone done a balloon loan on a residential loan? Is this a savvy way for me to buy another rental or will I fall backwards?

@Jessica Tsao

Hi Jessica, I did look into it but when I mentioned it to my lender (from US BANK) he quickly shut me down and said that US BANK is currently not accepting an downpayment that's obtained from hard money lending. 

My wife and I have very strong W-2s, and I honestly could save for about 6 months for a full downpayment and some cushion, but I'd like to use OPM. 

On an LLC note, I have not put my properties in an LLC since my lender advises against it if I were to utilize financing option in the future and that most banks won't lend to an LLC.

I am actually shifting toward finding a lender who will HELOC on an investment property at a decent rate. Have you tried HELOC on one of your properties?

Thank you, @Chris Wharton@Chris Wharton

"A rate and term refinance has no seasoning period. Have your LLC write you a note at 75% of the ARV, record the mortgage and abide by the terms (which should be higher than market to allow a NTB). Provided you did your DD you could now refinance anytime you like."

I was in the process of establishing an LLC and my lender noted most lenders will not loan to LLCs, including HELOC and cashout refi.

After speaking with a lender, they provided two options - a HELOC and a balloon loan. I have never heard of anyone doing a balloon loan on a residential loan. I thought it existed only on commercial loan side.

These are some key points he said: 

Balloon loan needs to be in the first position, so I will have to refi the existing loan that I have, which is 260k at 3.5%. Adding 35k (how much I need), I will get a 295k loan at roughly 4.1-4.2% at 30 year amortization and 10 year balloon, meaning at the end of 10 years, I will either have to pay the remaining balance, or refi again at that point.

Has anyone done a balloon loan on a residential loan? Is this a savvy way for me to buy another rental or will I fall backwards?