All Forum Posts by: Christopher Blanco

@Mindy Jensen as tempting as that sounds, a blended family with 6 kids with my wife and I each having a parenting agreement with our exes...moving is....complicated. :) If you ever offer remote work let me know! 

@Mindy Jensen As a native Clevelander, I avoid talking football.  Lets talk about Baseball or Basketball instead! :P

If I lived in Denver I would be there in a second, been a Software PM for the last 8 years. 

When there is a deal?

@Jeff Sprunger Depends on the area. I looked at a house in the university heights area on the east side. ARV was around $115K and taxes were $4500 a year. Shaker Heights can top that. The one house I looked at there was $7200 a year in taxes, arv was probably around $190,000 if it didn't need torn down :).

I ran a bunch of numbers and I think going the HML with a refinance with them after 12 months is the way to go. I ran through a bunch of simulations with these assumptions to help keep it clean:

• purchase+rehab budget = $55K
• ARV= $82K
• rent= $1125
• Purchase houses until available funds reaches 10K first year, then same amount each year after, if cash available allows it. 

Scenario 1:

• HML for rehab at 12% interest + points only payments for 12mos at 90%LTC (I kept it the same, but in actuality the program they use steps the interest rate and points down after 2, and 5 flips with them)
• HML cash out refinance to 30 year fixed at 7% (probably can get lower but wanted conservative estimate) 75% LTV
• Results after 3 years: Total Homes Purchased: 21. Total Monthly OP income: $10,721, Total Cash Generated $90K +, Total Equity Generated (not including pay down) $430,000

Scenario 2:

• Small Local bank, 75% LTC with a 15 year note at 5.5% 
• no cash out refinance as there is a 2% + 5% step down refinance charge
• Results after 3 years: Total Homes Purchased: 3. Total Monthly OP income: $1530, Total Cash Generated $20K +, Total Equity Generated (not including pay down) $82,000

Scenario 3:

• Cash
• Refi with HML (same as above) after 12mos (required seasoning period)
• Results after 3 years: Total Homes Purchased: 3. Total Monthly OP income: $1530, Total Cash Generated $38K +, Total Equity Generated (not including pay down) $82,000

So using the leverage, even though expensive at first caused a HUGE amount of growth. I was able to buy 21 homes (and could have bought more if I didn't limit it to 7 a year). I have 10,000 a month in op income, 2000 a month in cash flow. 

Thoughts on these scenarios and data?

@Joe Splitrock That is an option. The problem is two fold:

• It ties up ALL of my cash for the seasoning period, which is a minimum of 6 months
• My CPA is advising me to keep my business and personal data as separate as possible. 

If you ask 10 investors on here, which is better paying cash, or leveraging, they say leverage.

@Tom S.

Thanks. The $5000 is rolled into the loan. The HML will give me 90% LTC on rehab and purchase. As far as the appraiser, I am buying houses below market value, so I agree counting on the appraisal is risky, but my agent and I are being VERY conservative in the ARV's.

I am working on a spreadsheet now to evaluate that. I also need to take in account how many homes I can buy with each strategy. I'm finding some interesting numbers:

• If I go the HML I can buy twice as many homes, but I won't make ANY money on them until after year 2 and I have a 30 year note on each house.
• If I go the small local bank, and only finance Purchase and Rehab, I can only afford to buy 3 houses before my startup capital is expended, but I make money in year 1 and I only have a 15 year note on each. 

I will keep evaluating....

I am close to closing on my first property. I have talked to several (probably 15 or more) lenders. I have several options, including cash, to purchase my first property. My CPA is advising me to close everything possible in my LLC.

Here is what I am running into...what is the best financing strategy to allow me to purchase more deals. Let me explain. I currently have a SFR property that I put an offer on for $50K. So lets assume I get it. To get it rent ready, I estimate about 5K of minor repairs. My realtor believes the house to be worth $80-$85K after repair and rent. So my plan would be to use HML or cash to do the purchase and minor rehab. I can get 90%LTC. Now the problem with the HML loan is that its expensive, 12%! So I want to refinance out ASAP. I have some options:

• Conventional Bank, can refinance out in 6 months seasoning at 75%LTV, but need to do it my personal name
• Small Local Bank, will lend me 75% of LTC (cost not value) into my LLC, but only on a 15 year note. Cash flowing a SFR on a 15 year note is tough. They will allow cash out refinace at LTV after 2 year seasoning
• Hard Money Lender will refinance at 80 LTC before 12 months or 75% cash out LTV after 12 months.
• Talked to several private investors, but won't touch loans under $75K

I think my best bet would be the HML. Take the 90%LTC at 12%. Make the interest only payments for 12 months, then refinance at 75% LTV. I would $5500 down. It would then cost me $5900 in interest, I could then refinance into a 30 year fixed at $60,000 cashing out $11000. That would get my down payment and interest back minus about $500. I have enough cash to do this for 4-5 properties (I have about $60K to use).

Is this a good strategy?