All Forum Posts by: Chivas Miho

Hey Travis, sorry I cant make it this month, but let me know if next month's venue changes, little far for me to walk from downtown.  Thanks buddy

Way to go @Jason Rogers!  Congrats on this awesome deal!  Hope to touch base with you again sometime soon. 

Hi @Will Gile - I'm in a similar situation and wondering if you have any update on how you structured the "buy in" for the other partner?  

Aloha @Robin Mikolyski! I feel your pain here on Oahu, it's tough making a living here. My first question before making any major decision is: how long will it take you to save that $30k before qualifying for the HELOC?

Further questions might be: do you plan to convert your existing mortgage completely into a HELOC (some call this Sweeps Strategies)? Or are you planning to just obtain a HELOC in addition to your primary mortgage? If it's the latter, you may find yourself in a MORE difficult situation than you are in now once you draw cash for investment property. This because you will still be paying your monthly mortgage PLUS your interest due on the added withdraw for investments. This could potentially derail you from saving any future funds.

If you can convert your mortgage completely into a HELOC that could help your situation but it comes with major risks as well which you should learn before making any kind of move like this.

One consideration, which may not be favorable, is to just consider renting if it's cheaper than your monthly mortgage now. Theres nothing wrong with NOT owning a home, you're just making decisions that make sense for you. The pros of renting: lesser rent payments, no property tax bill every 6 mos which I suspect will increase in the coming years with the rail situation, no repairing one replacing broken appliances, no maintenance for lawn care (if you pay for these). If saving these expenses means you can reach your financial goals quicker, you owe it to yourself to analyze the numbers and reassess your living situation.

IMHO, I would not invest the money to build additional property on your land, unless you plan to sell at a much higher value. If you calculate how long it will take for you to get that initial investment back, it might paint a clearer picture. You can make your money go farther by investing out of state.

Wishing you the best, take care.

Aloha @Daniel Kong,

I would also recommend opening an account in HI just to have some security in being able to walk into your local bank at any time. Other things to consider:

1. Not sure if this us true but when I've tried to apply for business checking accounts in the mainland they wanted me to come in to sign paperwork in person. Some online banks accepted scanned drivers licenses and copies of utility bills to prove primary residence, but many brick and mortar banks said I MUST be in person signing which wasnt worth me flying out just to sign 1 paper.

2. When you need a wire transfer for future property acquisition, the security of knowing you are walking in to make the wire transfer in person might be worth it.

The $50 or so set up fee for Hawaii GE license and maintaining filing in a state where ur not really making any income are negatives but depends on what's more important to you. Good luck!

@CJ Wine - I also invest from out of state in Michigan, in the Jackson area.  City has been trying to make a come back recently but not as big a market as the other big names mentioned.  One thing to keep in mind is the mandatory City Inspections that occur every two years for non-owner occupied properties, which could bust your budget.  

Aloha @Korey Rowlson!  I'm still learning the market here too, but have 8 doors (3 properties) currently.  Just picked up 2 of them (duplex) a couple weeks ago, still vacant up on Second st.  Probably not the best time to pick up a duplex with the blizzard there, but I'm hoping we can get a tenant in there soon.

I've been using All Pro Property Management on 2 of my properties and the newest one I'm trying out Production Realty PM.  I'll hit you up on a message to give you the pros and cons I see so far.

I would say the interesting thing about the City is that the inspections are both a blessing and curse at the same time.  Most will say a curse because of the constant reinspections needed and the $$ you need to spend in repairs, which is true, but they should be money put aside anyway.  I say this is a blessing since you have some reassurance that the City Certified properties have been inspected by a third party every couple of years.  I also like that you can view the inspection lists as public record when you're trying to acquire new properties.

How's the flipping business been going there?  Any recommendations on Contractors?  

Thanks!

Hey @Sam T.- I forgot to mention the negative impact to your credit score too.  If you're going to do this, make sure to avoid opening any new credit cards.  The way the credit score system works is the 3 biggest impacts are 1) on time payments, 2) credit utilization, and 3) average credit history.  #3 will impact your credit score first.  If you open 4 lines at once, you'll drop your average credit history.  Example: you have 2 credit cards now at 10 years old and 5 years old = average credit history of (10 + 5)/2 lines = 7.5 year average.  If you open 4 more new lines now = (10 + 5 + 0 + 0 + 0 + 0) / 6 lines = 2.5 year average.  Could drop your credit score some major points, but if you have excellent credit now, I wouldnt be too worried about it.    If you need more info - Credit Karma is a great resource for free.  

Aloha @Sam T.! I did a similar strategy to what you're trying to accomplish last year. It's difficult to obtain a single LOC in that amount you're looking for, but the way I did it was, I shotgunned my application out to several local banks all at the same time. This way the banks didn't flag it like they would have if I had applied month after month. I basically was approved for a total of $120k by the time they finally started denying me ($50k, $25k, $25k, $20k).

Here's the catch - you really have to read the fine print in the loan documents.  Many of the unsecured PLOCs that I have all ask for interest only (at around 10%) PLUS 2% of the outstanding principal balance.  The outstanding balance is the important key here, sometimes they wont tell you in the online account information is in the paperwork.  Let's do a quick example calculation if I maxed out my PLOCs = $120,000 borrowed at an average 10% interest rate:

$120,000 * 10%/12 = $1,000 interest due PLUS $120,000 * 2% outstanding principal balance = $2,400.  Total due to banks is $3,400.  This is where you could easily go underwater real quick while you're waiting on your refinance to go through.  Just be careful.  I have a lot of credit to draw from, but I strategically pull from it when I really need to, and never the entire amount.

Also agree with @Jason D.'s statement on the DTI ratio when you refinance. When I did my first cashout refi, I told my bank the money would immediately go to paying off the LOC which was true. I didn't have any issue, but my balance was only $40k to repay back to my LOC.

I found it best if you could borrow some of the funds from friends or family and use the LOC to cover the balance. The benefit here is that you could ask friends/family for interest only payments (not interest plus 2% of principal)

Good luck!

@Kyle Kierpaul I'm not familiar with the Detroit market but I have a few rentals in Jackson next door. One thing I noticed in your numbers is the insurance values which I think is too low for the property. Depending on the year it was built, it could cost you much more. All of my rental are pretty old, 1920s to 1940s built. I just closed on a duplex that had an annual premium of about $1060 through Foremost as an all cash value policy only. Seeing as you are planning to take a mortgage out, the bank would likely require you to get a full replacement policy which costs even more. I asked my agent to get me a competitive replacement policy quote that would cost me about $2,000 annually. I decided to stick with the ACV policy for now. You may want to request a free quote from a couple of agencies. Your PM costs seem conservative at around 14% but just check if they charge a fee to put tenants in place where they take a % pf the first months rent. Mine takes an 80% of first months rent to find a tenant for you. This calculates to an average 17% for the year but if the tenants renew leases they will not charge that fee. Good work on analyzing, keep going!