All Forum Posts by: David Schulwitz

@Chris Seveney Thank you for the response. Congratulations on your deal. I understand BRRRR, I'm just trying to invest with the cheapest and most easily accessed funds that I possibly can. If I can avoid using expensive hard money lenders as much as possible, that would be great.

If I could buy and rehab a deal in all cash, that would be great, but 50k isn't enough to do that in my area. I'm just wondering if I should apply the 50k liquid I have to my home mortgage, allowing me to get a 56k HELOC. If I'm thinking of this correctly, it would allow me to recycle the funds sooner because as you pay a HELOC back, those funds immediately become available to use again. By using 100% cash instead of a HELOC, I'm avoiding the interest, but my funds are locked up until I refinance/sell the property.

Dearest BP Community - I come to you again for advice and a crazy check, so thank you ahead of time.

Here's my situation/question:

I own my primary residence in Fort Worth, Texas. It is worth 210k and I owe 162k, therefore I have about 23% equity in the property. For out of state folks who are not familiar with Texas HELOC rules, we have a regulation where your CLTVon your home cannot exceed 80%, meaning that today if I wanted to take out a HELOC on my home, I would only be given access to 3% of the equity (a disappointing $6000-ish).

I currently have around 50k liquid ready to deploy into real estate investments.

I'm looking for local Dallas/Fort Worth BRRRR opportunities as well as buying cheaper high yield turn-key deals in cash (50k-70k out of state houses yielding 12-15% in Indianapolis, Memphis, Pittsburgh, Detroit, etc)

Here's what I'm considering: what if I apply my 50k of cash towards the principal of my home, immediately reducing the balance of my primary mortgage down to 112k. I would then have around 46% equity in my home. Since the 80% CLTVTexas HELOC rule is in place, I could then have access to a $56k HELOC (210k value *.8 = 168k minus 112k balance = 56k). By taking a quick look at rates available for HELOCs in Texas, I could expect a variable interest rate around 4.25%.

I'm thinking this could be an advantageous move, because of the HELOC being a revolving line of credit. So if I were to use the entire 56k towards the purchase of a distressed property to BRRRR, I could recycle that cash to use it again as I pay it back (I pay back 5k, I can immediately use that 5k). Of course the disadvantage of this is that I'm paying 4.25% or so (it is a variable rate as apparently all HELOCs are) to be able to do this. The plan would be to basically use my HELOC as my new checking account, sending all of my direct deposits and income to this account (as explained in all of the 'pay off your mortgage in 5 years' videos).

OR - I keep my 50k in my accounts, and I use the pure cash to acquire a cheap distressed property to BRRRR. The advantage here is that since it's my own cash, my interest rate is 0%, BUT I have to wait until I sell or refinance (lets say 6-7 months down the line) before I can get at that cash again to use it/recycle it.

Part of me feels like I should just keep the cash and make smart BRRRR deals with it, and that I'd be sort of handcuffing myself and penalizing myself by directing it towards my mortgage/HELOC. The other part of me feels like it may be worth it because of the fact that I'd be able to access that cash again immediately as I pay it back, not having to wait for the refinance/sell day 6/7 months down the line.

Your thoughts? Has anyone else gone down this thought path? What am I not thinking about?

Last question: what if say 1 year from now, I move out of this primary residence and turn it into a rental. Can I continue to use the HELOC? Would it be due back immediately? Does any of this change if I do/don't deed the property to my LLCand keep as rental?

Thank you so much as always for your thoughtful responses.

Dave

Stephanie - great question.  I think it's important to start with the fact that there really isn't a "right" answer here.  It's going to have to line up with what you're comfortable with and what your priorities are.  I suppose that's what makes real estate investing beautiful and complicated at the same time.  

My initial gut reaction is that I would take the 150,000 to make nine $15,000 down payments (20%) on $75,000 single family homes in places like Memphis, Detroit, Pittsburgh, Jacksonville, Indianapolis, Ohio, etc etc).  This is probably too much of an exaggeration on my part, because I'm assuming you only have that San Antonio duplex towards your 10 mortgages count, giving you 9 more that you could acquire before being at your Fannie/Freddie max.  Also - the bank may way more than 15k leftover in emergency funds - not sure what you already have in liquid assets.  Anyways - buying nine $75k properties that are yielding around 13-14% in 2 star neighborhoods would be pretty awesome in my mind.  

I also really love the BRRRR idea though - I guess it depends how much time you have to put into real estate. BRRRR'ing will require a lot more personal time than just buying something that's fairly turn-key and waiting for the mailbox money...

Good luck!

Dave

Dearest BP Community - I come to you again for advice and a crazy check, so thank you ahead of time.  

Here's my situation/question:  

I own my primary residence in Fort Worth, Texas. It is worth 210k and I owe 162k, therefore I have about 23% equity in the property. For out of state folks who are not familiar with Texas HELOC rules, we have a regulation where your CLTV on your home cannot exceed 80%, meaning that today if I wanted to take out a HELOC on my home, I would only be given access to 3% of the equity (a disappointing $6000-ish).

I currently have around 50k liquid ready to deploy into real estate investments.  

I'm looking for local Dallas/Fort Worth BRRRR opportunities as well as buying cheaper high yield turn-key deals in cash (50k-70k out of state houses yielding 12-15% in Indianapolis, Memphis, Pittsburgh, Detroit, etc)

Here's what I'm considering: what if I apply my 50k of cash towards the principal of my home, immediately reducing the balance of my primary mortgage down to 112k. I would then have around 46% equity in my home. Since the 80% CLTV Texas HELOC rule is in place, I could then have access to a $56k HELOC (210k value *.8 = 168k minus 112k balance = 56k). By taking a quick look at rates available for HELOCs in Texas, I could expect a variable interest rate around 4.25%.

I'm thinking this could be an advantageous move, because of the HELOC being a revolving line of credit. So if I were to use the entire 56k towards the purchase of a distressed property to BRRRR, I could recycle that cash to use it again as I pay it back (I pay back 5k, I can immediately use that 5k). Of course the disadvantage of this is that I'm paying 4.25% or so (it is a variable rate as apparently all HELOCs are) to be able to do this. The plan would be to basically use my HELOC as my new checking account, sending all of my direct deposits and income to this account (as explained in all of the 'pay off your mortgage in 5 years' videos).

OR - I keep my 50k in my accounts, and I use the pure cash to acquire a cheap distressed property to BRRRR. The advantage here is that since it's my own cash, my interest rate is 0%, BUT I have to wait until I sell or refinance (lets say 6-7 months down the line) before I can get at that cash again to use it/recycle it.

Part of me feels like I should just keep the cash and make smart BRRRR deals with it, and that I'd be sort of handcuffing myself and penalizing myself by directing it towards my mortgage/HELOC. The other part of me feels like it may be worth it because of the fact that I'd be able to access that cash again immediately as I pay it back, not having to wait for the refinance/sell day 6/7 months down the line.

Your thoughts? Has anyone else gone down this thought path? What am I not thinking about?

Last question: what if say 1 year from now, I move out of this primary residence and turn it into a rental. Can I continue to use the HELOC? Would it be due back immediately? Does any of this change if I do/don't deed the property to my LLC and keep as rental?

Thank you so much as always for your thoughtful responses.  

Dave

@Denny R. - SVSU - yep!  Many friends went there and a couple of my buddies played football for the Cards!  I went to Heritage High School off of Center Road. 

Thank you for the advice.  

Yes I agree on the referrals.  

On work ethic:  I've heard a couple of times on BP and the podcasts that you should go to Home Depot when they open to see if you can find contractors there getting their materials for the day.  At first this sounded a little too simple and silly to me, but the more I think about it, it's pretty genius.  I might give it a try to find that contractor who takes pride in his work and works his *** off!  

Congrats again on the flip.  I'd love to connect with you Detroit investors when I come back this summer.  Grab a beer and talk real estate at a Tigers game.  

Dave

@Andy Webb @Ryan O'Mara

Thank you guys for the responses.  

How many deals does one have to successfully complete before they can maybe bargain down on interest rates or points?

The reason I wanted someone local is exactly what Andy said.  If rates and terms are equal, I want someone in the local area that if I absolutely need to see them face to face, I can.  

I'll check those two out Andy - thank you for the advice again!  We need to do coffee/beer one day and talk RE.

Dave

@Charisse Hines

I'm just one opinion, and I'm not in Florida or familiar with your market, but to me I think it looks like a deal.  

I think after all expenses have been paid and you've socked away money for repairs, CAPEX, and vacancy, if you can cashflow $100/door (so in your case $200 for the entire property) you're doing pretty well. So if you're at $234, that's pretty great! Don't forget to put away a little for CAPEX too though - I didn't see that in your numbers. Personally for newer properties that shouldn't need a lot of work, I go 4% for repairs, 4% for CAPEX, and 4% for vacancy...but that's just what I've experienced from my rentals - every property and market is different.

When I bought my first couple of duplexes, my main concern was satisfying the "1% rule".  At 900/unit, you'd be "one percenting" if you could get this duplex for $180,000...so if you can get it for 160k, again, I think it's a win!

Continue to analyze, be conservative, but TAKE ACTION - don't get analysis paralysis like most do :)

Good Luck and enjoy the FL sunshine

Dave

Good Evening BP, 

I'm breaking into the BRRRR/Flip game. I've done lots of buy and hold (basically turnkey) investing in the past, but this will be my first rehab project. I'm in search of TEXAS BASED, preferably DFW BASED Hard money lenders to work with. I know there are a ton to choose from, I'm just trying to figure out who is willing to offer me the best terms. I have 6 years of REI experience acquiring and owning rentals, but again no rehab experience. I have great credit (780ish) and a healthy DTI with enough capital for down-payments/points/closing costs in the bank.

So far, the terms I've been presented have been:  

13-14% interest, 2-3 points, $250-$500 in other fees, 70% LTV of ARV, no wrapping in of points/fees. Like most others in this business, I'm trying to keep as much cash in my pocket during the deal as possible to improve my COCR.

Is this as good as it gets for an experienced investor new to rehabbing?  Are there any DFW based Hard Money Lenders who can beat these terms for me?  

Thank you for your time.  

Dave Schulwitz

Congratulations @Denny R.!!!  Property looks great and I'm excited to hear about the rent coming in.  

I just connected with your awesome realtor the other day while seeing his success post. I grew up in Saginaw, but now live down in Dallas Fort Worth. I'm not new to REI, but I am new to rehabbing.

I'm asking this because I'm getting ready to hire contractors soon as well (I'm about to make my second offer for a distressed property this week, first one didn't pan out, hopefully this next offer is chosen):  How many contractors did you have submit bids?  Were the builders/contractors handling the entire project, or just a portion of it and you were the overall project manager?  If you could go back, would you handle the 'interview/walkthrough' any differently, or ask them different questions?  How did you agree on when/how much they'd be paid?  

- Sorry I know that is a lot, but I have never hired a contractor to help me with a rehab and I'm a little nervous.  

Congratulations again!  It makes me happy to see all of you smart and talented investors making metro Detroit beautiful.  Go Lions/Pistons/Tigers/Red Wings! :)

Dave

@Sarah Nowak

Thank you I appreciate it :)  I really didn't have too many questions here (besides the ones you answered), was just looking to put the link to my analysis out there since I'm new to the rehab world.  

I think you're right - I think $200 a month should be plenty for most properties in Texas - Thankfully we're not having to heat flips throughout the day and night like we would in the snowy north - that could get expensive very quickly in a big house.  

I agree on the HML. This is someone I know and trust that is also helping me analyze the deals and keeping me from making some mistakes. Once I get my BRRRR train going, I'll be sure to shop around more and get that down. It would be great to be 0-1 points with 9-10%...

Thanks again for your response.

Dave