All Forum Posts by: Curt Bixel

Is the idea that the banks might withdraw my credit line in a crisis a realistic possibility?

I am trying to position myself to be able to take advantage of any disruption in the market due to the fallout from the coronavirus.  This does not seem to be like 2008, when housing was very much central to the problems, but we could still be looking at significant impact from job loss, rent loss, and a probably second wave of Covid-19 this fall  

In any case, I want to assure that I have funds at the ready to offer a quick closing.

I currently have received conflicting advice from several people whom I know and trust, and am looking for further advice to help me make the best decision possible.

The first suggestion is to simply get a line of credit.  This would allow me to have access to funds fairly rapidly, while not paying interest until I actually need the funds.  

The second suggestion was to go ahead and do cash out refinances on two of my rental properties so that I would have the cash available in my bank account.  I would, of course, have to pay interest until I used the money, but this would be much more dependable source of funds should things go south in the economy, because, should the economy suffer significant damage, it would be possible that the banks would pull back as well to manage risk, and would prevent me from drawing funds from my line of credit, right when I need them. 

As I look into this more, I am finding that it is a complicated issue and that there are upsides and downsides to either option.  I would be interested to hear what other experts have to say. I may even due a hybrid of both.  :)

So, if I asked for 10% and 2% origination, that would put me in the range to get good flippers to work with?  

For example, if I were to lend $100,000, I would ask for $2000 + interest at a rate of about .9% per month, and that would a reasonable rate to ask someone who is good at flipping? 

Still seems pretty easy.  

And the risk is that the flipper runs into trouble either because of a rehab that gets out of control, perhaps due to something unexpected coming up, or the economy tanks, leaving all flippers in a bad situation, and in that case, my principal might be at risk. 

Does that sound about right?

And thus, getting a good flipper mitigates that risk because they are less likely to be surprised by anything, and because they are more likely to complete the flip quickly and thus have less time for the economy to change.  

I appreciate the advice.  Right now, what I am seeing from other threads on Bigger Pockets is that you can get 10-20% return as a private money lender.  This does not seem believable, as if you started with $100,000, you could double your money about every 4 years.  If you were 20, you could grow this to more than 10 million dollars by the time you were 50, without doing much of anything.  

Too good to be true.  Clearly there is a lot for me to learn here.  

I am in the process of refinancing several rental properties and should have several hundred thousand dollars of cash in hand when this process completes.

I have been looking for properties that I can purchase and add to my buy and hold rental portfolio. I am finding almost nothing as the market is quite hot now and few good quality properties can cash flow. On thought is to flip a property, although this seems like a risky time in the market cycle for someone to try a first flip.

I have been approached by a company that seems to have quite a lot of experience flipping properties and my first conversations with them have been very professional and raise no red flags.

That being said, I am also new to this area and have quite a lot to learn before putting these large quantities of money in the hands of another.

I am interested in any and all advice you might have for me at this point because I would rather spend a hundred hours reading and learning instead of learning some hard lessons by experience.

I am a high school science teacher with a small rental property business on the side. I started in 1993 when I purchased a duplex and rehabbed it while living in it. Did this with both sides.

I purchased several more properties between 2001 and 2005, which was a terrible time to purchase. I overpaid and struggled to get through the Great Recession until appreciation in both property values and rent pretty much solved all the problems caused by not really having any idea of the business side of things.

I have decided to refinance several properties to have the funds necessary to be a cash buyer and am now looking at ways to purchase properties at a discount and make good, numbers and researched based decisions on where, when, and what to buy.

As I learn more and more, it seems clear that the numbers indicate that the best strategies involve choosing area that are headed for significant appreciation, and areas that are likely to undergo gentrification offer the best possibility for maximizing profits.

I have some reservations about this. I wonder if anyone else has given this some thought and perhaps has come up with some strategies that provide for strong returns that do not involve such large degrees of community change.

@Samantha P.

I am glad to hear that the son brought the rent current. This is at least some indication that his heart may be in the right place. That does not, however, mean that he won’t get himself in enough financial trouble that he won’t stop paying rent at some point in the future.

I think the best way to balance your instincts to be empathetic is to get a much better understanding of the situation. Verify that they are being completely honest and straight forward with you. One thing I have done in situations like this is to be empathetic with them but tell them I have a business partner who is a stickler for all the details and your business partner has made any forbearance in rent dependent upon full and detailed information about the status of the mother, her prospects of moving back home, and their lack of any funds to pay.

If this stuff does not all check out, you should get a lawyer and evict immediately.

If it does all check out, then you are left with a tough decision on if you are willing to lose money in order to support someone through a difficult time. In that case, you need to be prepared to lose rent, and you may end up evicting in the end.

I recently did this and was surprised when I did finally get them to move out that they left the apartment in terrible condition necessitating extensive rehab.

This was an expensive lesson for me. I’m pretty sure I would not do it again.

There’s a property I was interested in. Before I can make an offer it was put under contract by an out-of-state investor. After having an inspection done and receiving the report the out-of-state investor walk from the deal. Before inconvenience the tenants or my realtor with a walk-through I am curious if in cases like this it’s reasonable and possible for me to somehow get a copy of that inspection report. It seems like seeing that would answer a lot of questions for me now before doing a walk-through putting everybody to all that troubleAnd then get in my own inspection report which will probably reveal the exact same things.

@Guifre Mora

Lol. I was sort of waiting for someone to point that out.

@Nathan G. I found your post to be thoughtful and a bit familiar. I am a long time landlord and have just recently begun looking into expanding my portfolio. I am, however, finding few properties that can make the numbers work in Columbus Ohio, as far as buy and hold or brrrr are concerned.

I wonder that they only current working strategy in Columbus right now might be flipping, and would love your insight on that. I have even positioned myself to purchase with cash in order to access better deals, but am having little success.