All Forum Posts by: David Lutz

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $305,000

Single family home build in 2020

What made you interested in investing in this type of deal?

growing economy, population

How did you find this deal and how did you negotiate it?

connected to investor friendly RE Agent through another investor friend

How did you finance this deal?

conventional 25% down, used other financing for remaining 25% no personal cash in

How did you add value to the deal?

ran the numbers to identify the best area to buy based on taxes, growth, etc.

What was the outcome?

rented out for $2000 per month ~30 days after taking possession

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, feel free to PM me for referrals

@Kerry Baird  I think you just became my new hero. This is just what I was looking for (after reading more discussion threads than I'm willing to admit)

I'm going through the same thought process. What did you decide to do?

My thinking is that if a Line or Loan is better depends on how quickly you can put the money to work. If you can keep it turning over pretty quickly I think taking the loan is better, since you never intend on paying it back any faster than you need to, you just keep rolling it over. If you think the cash will be sitting for any length of time then the Line saves you costs during the down time.

How are you guys identifying lenders that will allow you to do a deal with the seller holding the second? That sounds like a great approach.

I'm in the same boat. It's not just the market appreciation, I also want to tap the equity my tenants are building for me.  Has anyone found a good option for getting a second on an investment property. Although a cash-out refi is always an option, I'd like to avoid that since I'd lose the existing super low rate.

Just depends on how it gets reported. I was buying a property and they looked at my existing draw on my HELOC for calculating my D/I ratio. If I had a second I would have been hit for the total amount, with the HELOC I was only hit for the portion of the line I had drawn.

Did you find someone to give you a HELOC or a second on an investment property? Easy to find for a primary residence but I'm still looking for good options to pull equity out of the investments without refinancing the underlying loan (which has a good rate I don't want to lose)

Hey Cliff. The process is pretty streamlined. They do an automated property valuation or a drive by, which is free. If you don't like those numbers you can request a formal appraisal but that has a cost you pay. Assuming you want to move forward you have to submit paperwork for any income you're using to support your D/I ratio. That included my tax returns as well as rental agreements for properties I had purchased since my last returns. In general the process was pretty easy, but slow. I think it took about 4 months from when I started until I had the HELOC checkbook in my hand.

One issue I ran into recently is that credit unions (at least Third Fed) will only write you a HELOC if you have 5 or less mortgages. So if you have a primary house and more than 4 investment properties you'd need to use a different lender. PM me if you have specific questions and I'd be happy to answer them.

For what it's worth I've been evaluating putting solar on my primary home knowing it's likely I'll be turning it into a rental at some point in the future. Buying through Costco I can get 1.5% financing, they will roll the cost of a new roof into the financing, and I get a 26% cash rebate from the gov. The end result is either a $8K loan at 1.5% (by not applying the rebate to my balance) or $10K out of pocket for a new roof. The $18K swing in cash in vs cash out and what how I can invest that money is actually more important from a profitability perspective then if I can charge the future tenants anything.

@David M.  it's not just the IRS and gift tax. You'd now have a signed document saying that the funds are a gift. There's not many people I'd make an investment with and give them a written note saying they don't have to pay me back.

Plus gift funds can't come from someone with a financial interest in the transaction, so you're in fraud territory again.

That's also a lot of work and questionable legality to avoid the extra point of a DCSR loan

@Tyler Tapley There's a bunch of their info and assumptions you have to double check. I think their vacancy, repair/maintenance, and CapEx are pretty iffy. Insurance cost projection is also very optimistic. I also have some issues with their appreciation assumptions, there aren't very transparent. I think they're inflation adjusted but who knows.

In general I thought their neighborhood ratings looked fairly accurate - they just don't capture what direction the neighborhood is trending. What issues are you seeing with them?