All Forum Posts by: David Lauka

Hello BP! So I'm fairly new to REI and was looking for some expertise. I recently purchased my first SFH investment property and that is going very well. My property manager just informed me that one of her clients is looking to sell their 6 unit property for 140k. I don't have all the specifics but she indicated it brings in about 40k/year in rent and is basically fully leased. I unfortunately have a lot of my funds tied up for the next 3 months and I was wondering if there were any creative financing solutions anyone is aware of for turnkey properties such as this one. The most I could probably bring to the table would be 15 - 20k. Are there any options anyone would recommend to fund this deal? Thanks!

 Thanks Ramon!

  Thanks Aaron! 

Hi BP Community,

I wanted to share that I closed on my first property on May 19th and I couldn't be more excited! I purchased a 2 bedroom 1 bath SFH for $66,000. The property is basically ready to rent and I suspect that I will have my first tenants in for June. I am using a property manager (Haily with Jakobson Management, she's awesome) and she's got tenants lined up already. I suspect that I will probably cash flow about $130/month after setting aside money for future repairs.

To pay for the property I used funds from my HELOC to put a 20% down payment on the property, as I didn't want to pay the PMI insurance. I also lent money to a local real estate investor from my HELOC to help pay for this first property (6 month loan- 12% plus we will split any additional profits made after cash-out refinance). I plan on applying the funds from this loan as well as the first year's cash flow from renting the property to pay back the HELOC and use my own money to pay off whatever is remaining (likely 8 - 10k).

For my first property I didn't want to make a purchase that needs too much rehab work, as I was hoping to first get a feel for the mechanics of buying investment properties. In the future I will plan on using the BRRR strategy to purchase more properties but am not opposed to using my own funds if the deal makes sense.

I am thankful for the BP community and have been encouraged by the success story of others and hope my story can encourage anyone who is thinking about buying their first investment property.

If there are any investors in the greater Kalamazoo area who are interesting in selling or partnering on deals please feel free to connect with me.  Wishing everyone massive success in 2017,

Tanner Lauka

Many thanks for breaking it down for me John, very kind of you!

Hi @John Leavelle -

Thanks for spelling the math out for me!  This gives me a lot to think about :)

Math isn't my strongest suite so please tell me what I'm missing. Say I put a 20k DP on an 80k property. I cash out 70% LTV on the original 60k loan. Minus the closing costs wouldn't the cash out be 42k, giving me enough to cover the original DP? Obviously I haven't done this before so your insight is appreciated!

Whatsup y'all!

So I'm pretty excited about making a splash in REI and wanted to share my 5 Year plan and hopefully have some of you pro's critique it and provide sound advice. I've got a great realtor, property manager, and portfolio lender lined up and they all think this plan is fairly reasonable for my area. The plan is outlined below pretty simplistically but I am wondering what kind of growing pains I should expect for this plan:

Year 1) Purchase a total of 8 units via SFHs and multi-units.

Year 2) Purchase 16 Units via SFHs and multi-units

Year 3) Purchase 24 units via SFHs and multi-units

Year 4) Purchase 32 units via SFHs and multi-units

Year 5) Purchase 40 units visa SFHs and multi-units

I have around 25 - 30k of my own money to start this operation with roughly 85k of HELOC available to me. My credit is excellent and overall I'm in a pretty sound financial situation to leverage mortgages.

My plan is to targeting properties 80k and under and use the HELOC's for down payment and cash out refi after 6 months. I have discussed this with my lender and she thinks it is a viable approach. For SFH's my lender requires at least a 15% DP and 25% for multi-units. They will cash out 75% of SFH's and 70% of multi-units. I am planning on pumping in around 25k of my own money each year to this plan in case the cash out doesn't cover the spread.

I am targeting a cash flow of around $200/unit.  I'm using the BiggerPockets tool to help with the calculations and assuming 5% vacancy, 5% repairs, $183 capex, and 11% for my property manager.

According to my portfolio lender I should be able to get best rate financing for my first 10 properties by using 5 without an llc and then opening an llc and do 5 more. Once that is used up I may consider bringing in some private lenders for funding the down payments and use ARM's for additional loans.

I mainly want to buy and hold but also want to have properties that will appreciate in value and can sell off every 4-6 years.

I have about 115k in my 401k that my lender says I can use for reserves but was wondering how I can keep up the appropriate debt/income ratio so that I can continue to grow.

I appreciate any feedback to this plan.  If you think it's crap, please let me know before I make my first purchase! :)  

David "Tanner" Lauka

Thanks Tim Stolt, I appreciate the feedback!

Thanks Darren - That's great information.  I'm still figuring this out and appreciate the advice.  I never considered the additional purchase power of cash.  Thanks!

Hello BP Community,

I am planning on making my first purchase(s) in the next few months and spoke with a few portfolio lenders and it looks like using the HELOC for financing is a great option. My line of credit will be roughly 100 - 150k so I'm planning on using that as down payments for 4 - 8 units depending on what makes the most sense. However, I am unsure of how I want to repay the HELOC, through cash flow from the properties or from cash out refinancing the properties.

My instincts are telling me to use the cash out refinance to pay back the HELOC because I don't see the cash flow as paying back the HELOC fast enough and I'd like to repeat the process of using HELOC as down payments sooner rather than later. Any insights on how either approach will impact cash flow, debt to income ratio, and the ability to grow aggressively would be great, thanks!