All Forum Posts by: Dave Melton

It tends to be lender specific. Most investor centric lenders tend to offer 75% LTV on cash outs but will generally do 80% on rate/term refi. Being new to investing many of the larger banks will do 80% cash out on FHA's.

Find your local RIA (Real estate Investors Association). Lots to be learned for the active investors in your area.

I've always viewed 1031's as "kicking the can" you are only postponing the tax on one deal to handicap the tax benefits of the next deal. I'm not saying there aren't cases where it's not the smart play but In my mind it's similar to people trading in a car they are upside down on making them further in the hole on the next car. I'd rather take my lumps now and not handicap my next deal.

You might also want o have a network of contractors you can call to ballpark costs of a project for you. This is a situation where relationships are invaluable. A contractor you have a track record with will better understand your needs and give more accurate estimates. There is at least one app insurance adjusters use called "Xact analysis" or something close to that. It's not free and the costs it comes up with are well above what I generally expect to spend but it is very thorough. Experience is what most of us lean on. Perhaps seek out an experienced partner to work with. Reduced profit on a tour first couple of deals can be much cheaper than paying for your mistakes out of pocket.

Are you planning to use cash to close and immediately doing a cash out refi? You might find it more difficult to cash out with little to no seasoning. Will you have the capitol to cover the rehab? Keeping in mind your plan is to operates at 75% occupancy and that means 75% of income meaning pretty much no cash flow while you are not only paying the mortgage but also paying to rehab the vacant unit and any incidental costs that pop up. It can still work just be prepared to have Murphy waiting behind every project in every unit.

The worst they can do is say no. Don't offer more than makes sense for you. Granted that might not be enough to make the deal. Not every house you see will work for you, and not every offer you make will work for the seller. Don't get attached to a house you don't own. Either the deal works or it doesn't. If it doesn't, move on. It's more important to be known to close on your low offered than to be the person who pays more and might not be able to close when the number reality hits.

As Sean touched on your refi lender may require a certain amount of "seasoning". Additionally your initial financing might have some sort of prepayment penalty. For the purpose of this question let's assume you initially used a "hard money lender", you've made your repairs now you simply go to the long term lender of your choice and apply for a "cash out refi" (this is what we called it before BP coined the "BRRR strategy"). Your lender most likely will loan you 75-80% of appraised value. It doesn't matter at this point if you owe 20K and spent 80K on rehab or owe 50K and spent 10K on repairs if the property appraises for $100K they will lend you $75K (assuming they offer 75% on cash out).

Any time you do a "subject to" if the mortgage company find out they could call the note due. As long as the payments are made the mortgage company isn't going to do anything more than process payments.

Their inquiry was that I had taken deduction for more mortgages than was reported to my SSN. I simply provided additional copies of the 1099 int statements issued by the lender under the EIN of my LLC. I claim these same mortgages every year just one year someone looked at it and had questions. People buying homes "subject to" would be in the same situation as the mortgage interest will be reported to the sellers SSN. The interest is still deductible it just doesn't get reported correctly from the lender as the lender doesn't have the buyers info and would likely call the note due if they were aware of the situation.

Mortgage companies don't read the obits. Subject to is still a valid option. It might be a good deal for someone looking to buy and hold. If you are trying to wholesale you should already have a buyers list. Network network network.