All Forum Posts by: Daniel G.

Interest payment deductions are quite limited now on cash-out refi.  The stuff I read says that from 2018-2025 you can only deduct cash out refi if used on direct improvements to a primary or second home. I took that to mean that if used on a rental down payment I can't deduct the interest.  Before 2018, I think you could deduct the first $100K cashed out in a refinance no matter what but apparently that's not the case since 2018 (except for some complex grandfathering rules...)

That was my interpretation.  But the 'internet' is not always easy to understand on these specifics.  I'm going to assume the worst though on that.

Is a HELOC's utility reduced if I can't refi with a good fixed rate after using it for the purchase? With a HELOC I worry about rates going up, and I can't refi to fixed rate like if I refi'd and sat on the cash a few months. Maybe it is in the noise, someone would have to tell me I'm worrying for no good reason.

I don't want to get too much of on a tangent on economy @Chadwick Fairbanks but YES.  I have been super concerned about inflation, and that prices won't really be coming down because we're all trying to ignore the elephant in the room.  Governments print money and try to fix problems that way = inflation.  Funny, I have also been thinking the same thing, that we'll all try to live in denial (stagflation) until reality hits us in the face in a way that can't be ignored, and then hyper-inflation and much bigger problems.  With our new administration I am worried that gov't will keep trying to duct tape the economy.

I meant preapproval, not prequalification. Anyway I had always thought that some proof of ability to finance is required in a seller's market. Maybe I'm thinking too much like an MLS homebuyer and not an investor? I'm definitely new to this.

@David M. - no, I prefer not to be highly leveraged.  But you did make me realize - I could always get the investment conventional loan using father's $150K and close on property, then do a refi on my primary later if I wanted to pay the investment mortgage down (for example if the investment mortgage was a higher rate & refi I can get better rate since primary home).

Also David - are you saying the investment property mortgage doesn't hit my DTI (in eyes of lenders) like a primary home refi would?

I think the loan officer I was talking to at my bank was also being too rigid and maybe I should try another bank or loan officer.

So I'm starting out considering rental property investing.  I've talked with my lender (on my current house) and asked some questions.

I have $200-$230K in equity I can access depending on how an appraisal of my house would go.

My father wants to kick in some cash (maybe $150K) for the investment property too.  We'd buy something in the $300K to $500K range in the North Utah area most likely.

We'd finance the rest with a co-borrower mortgage.

So there's two loans.  (1) My primary cash-out refi, and (2) an investment property mortgage

We want to take our time and do plenty of research, watch the market, etc.  Maybe watch for months...  But I also want to be able to pull the trigger right away if the right opportunity comes.  But pre-qualifications expire, loan applications and rate locks expire - everything pushes you to get your financing lined up and find your property in the next 30-60 days.

If you don't want to act so fast but want to watch the listings and wait for that great opportunity, all your financing approvals expire... and when the great opportunity 
shows, you are delayed setting up financing again.

Is there a way to have it both ways?

How do you navigate the financing aspect of all this?  Do you literally have to get prequalified over and over?  Is there education on BP that helps teach the strategies?

Regarding the market now, are there niches where people are less focused and investors might still score a deal? I know it's complex, but if the market is mostly people looking for more space, bigger home, easier social distancing either in SLC or beyond, my guess is they'll want bigger, nicer spaces meaning suburbs.  It seems like urban units, particularly smaller, rentable, fixer upper units near downtown SLC might not be quite as hot of an item as single family homes in the various suburbs.  Even homes and lots in Utah/Davis/Tooele seem to be rising in price this spring and getting fought over (like @Cherie Orellana is saying) - out of staters coming from higher priced markets hitting the SLC suburbs, and local homebuyers hitting the fringe suburbs.

I mean the properties in SLC itself still seem to have gone up significantly this year, but not _quite_ as much as in many of the suburbs.  Could that thinking be valid?

Yeah, it's just feeling too hot right now in this area for someone like me.  I'm going to see if there are other investments that are a little more predictable and somewhat safe and liquid right now if I do decide to cash out my equity.

Then I'll keep watching prices.  I want to see movement over the next little while.  I'm thinking of looking on the "fringes" too for an investment property, Saratoga Springs, Eagle Mountain, Tooele/Grantsville, Payson and Santaquin.  I know they are heating up too, but might still be more affordable - expect continued growth in those areas might help the value.

I'm looking to hold onto real estate investments for 10 or 15 years.  Maybe cash some out if family wants to move to a nicer neighborhood...

Wow what great advice!  Can't thank you all enough.  Quite a bit to think about.

I am a pretty risk averse person and haven't invested really (401k and a little stock dabbling with small amounts). I want to be more aggressive, which should be easy even for conservative me.

I spreadsheet "simulated" rental properties of various purchase prices. Current loan rates, HOA fees, maint. costs, property tax, insurance, and rental rates for certain areas in SLC, trying to match up purchase prices and rental prices. The biggest variable was rents being all over the map, I didn't know how to predict what rent would be at all.

It was enough to convince me that there is definitely risk involved. I think "running the numbers" will mean more to me after some education and examples. Initially I plan to be able to cover all loans with my day job just in case.

@Stephen Brown - I never considered looking for cheaper areas, just assumed I'd be close to my first rental property so I could tour it, verify it, get involved if I had to - although I was considering hiring a company to manage it at least at first (no Ibrahim never been a landlord and my day job is very demanding so little time). Everything within 2 hours of me seems to be skyrocketing in price. Was just "assuming" I had to invest in a property within driving distance a bad idea?

@David A Lisowski - I was thinking of buying a place for at least 50% cash or more. Seems that very expensive properties >$400K probably aren't a good first choice anyway?

@Brent Coombs - regarding timing.  It is uncertain times, and money is cheap but not real estate. Is it better for things to be more balanced, e.g. money maybe more expensive but market not so very hot? I have heard multiple stories of homes getting bid up to 10 or 15% over list price in a few neighborhoods here in Salt Lake City.  Seems a little toooo hot.  A realtor I talked with over the weekend said multifamily units are few and far between too.  Also, with moratorium on foreclosures, that makes me nervous, I feel like I should at least wait until moratorium is over.

It was mostly cheap money/equity that got me thinking. The real estate market itself has me nervous frankly. That's why I was thinking of cashing out and sitting on it. @Will Fraser I was asking the exact question you posed to me.  If I DID pull out $200K, could I put it somewhere that is a better investment now, and get into real estate from there when some of the uncertainties resolve?  Frankly it seems that I really cannot get >3% return right now with low risk anywhere due to uncertain economy and COVID.

Lastly, I'm staying very transparent with my dad. If he wants to join forces I will but I'm not going to coerce. Don't trust myself yet. He does have long term friends and contacts in the finance, contracting, and real estate industries, so we might seek some advice through his contacts also.  I'll probably read through the education here and keep asking questions for a bit before deciding for sure whether to cash out on my equity.  Thanks again everyone I'm loving BP already.

I'm a Utah native living in West Jordan. I have been noticing the crazy market lately, and also the great mortgage rates.

If I did a cash-out refinance right now, I could get around $200K to $230K from my equity, and could afford the new monthly payment even with no rental income (for the short term).  It seems like a great time for such a refinance to lock in low rate.

My father has also retired and is willing/wants to help me out, and is considering putting $100K to $150K of his own.  I trust him implicitly.  (The real question is, should he trust me to know what I'm doing... )

I don't think mortgage rates will be going down, only up.  So I'm willing to do the refi and sit on the cash from the refi for 4-6 months while I learn what I need to know and look for the right investment.  Unless someone tells me I'm nuts for that.

The thing I have no idea about is if this is a good time to invest. It seems the prices of properties in the $250K to $400K range (which I'd think would be good for rental properties) are quite inflated right now, even more than the high end of the market. I'm worried that rental properties at these prices that can turn a reasonable profit/ROI compared to purchase price might be few and far between. And - will I pick a good neighborhood?

So, I have a lot to learn.  

• My main question right now is - is the cash out refinance right now a good idea?
• Second question is - If I'm serious about investing, is now a reasonable time to start learning with intent to invest in the next 6 months?

Thanks in advance!