All Forum Posts by: Eric Schultz

@Khristopher Kyle Garay

There is rent control in several CA cities and you might be negative Cashflow in the initial years, but if you are buying to hold long term there is no question the coastal appreciation will eventually make up and even exceed expectations.

A fellow SoCal investor in my network simply buys one property a year locally. He has done so for about 10 years. His net worth is now multi-millions. A very simple plan with some patience is all it took.

@Kyle C.

There are lots of other options for investing $50K passively or at least semi-passively:

- Private lending / promissory notes

- Multi-family syndications

- Self-storage syndications

- Short term rentals without owning the property (arbitrage or partnerships)

There are a lot of investors out there that start with single family and small multi-family rentals. It can be a long, slow road building a portfolio. Maybe look at skipping a few steps and get into the more passive investments that many eventually wish to be in down the road.

@Ryan Hurst

If you have any plans to scale, build in the costs for property management into your underwriting now.

You can get by without a PM on a small portfolio, but the good property managers are worth the price. Interview several PMs. Review the management agreement. Ask your 20 questions. Ask for references. Then hire one. You should be getting monthly statements indicating all collected rents, fees and expenses. Any expenses should be backed up by a receipt or invoice. The first time any rent collection is late, get the details and follow up as needed. Set expectations and stick with it.

@James F.

I do not own property in Florida but did look along the I-4 corridor between Tampa and Orlando at one point. It maybe a sweet spot area based on proximity. Something to look into...

@Jesse Stein

Quick analysis with some assumptions.

$265K purchase with 60% LTV = $159K original loan

After 6 years of tenant paying down the mortgage, conservatively you have a balance of around $150K.

Current market value estimate: $600K

Potential HELOC amount: ($600K x 80%) - $150K = $330K HELOC at 4.75% variable rate on investment property (based on 760+ credit score).

If all $330K of HELOC funds were deployed into B-class SFH properties out of state at average purchase price of $150K each with 80% LTV + closing costs, you could acquire another 9 SFH rental properties. The HELOC monthly interest would currently be $1,300 per monthly (potentially tax deductible) versus the $1,800 net monthly cashflow from the 9 additional properties at $200 / month / each. This $500 net cashflow delta per month isn't quite worth it. Plus you are borrowing short on what is likely a long term investment. Not a good idea...

So, next option would be to take that $330K and purchase some off market deals out of state via wholesaler, broker or turnkey company that specializes in BRRRR strategy.

Maybe you can get into 3 properties, including the rehab funds with that $330K. Stabilize those properties within a 12 month period, refinance out most of that $330K, payoff the HELOC, rinse and repeat the following year.

In this case, you are initially borrowing short to force equity only to refi into long term debt. You do need a trustworthy local market team to execute the BRRRR strategy, but the chance for infinite returns is there.

@Lara Nicole

With $190K available to invest, looking out of state would allow you to get into 5 or so SFH in B-class areas with $150K+ per deal on conventional financing with 25% down payments. That could easily produce $1K net monthly cashflow for you plus the other benefits of real estate: appreciation, loan paydown (by tenant), tax benefits (paper losses), and inflation profiting (inflation erodes the debt).

@Evelina Khaimova

The lender’s commissions are usually under “guaranteed lender fee”, “origination fee” or they are likely charging you more points to hide the lender fee.

Look for a Lender Credits line item on your preliminary Closing Statement. If you don’t see it, ask for where the Lender Credit is to reduce your cash to close amount.

The lending environment has definitely changed since March 2020. You could always get another rate quote and decide if you want to close on this loan or not with this particular lender. You can always walk away before doc signing...

Here are the steps to determine where you are at in the loan process:

Step 1: Apply for Loan.

Step 2: Loan Officer Review.

Step 3: Initial Processing.

Step 4: Initial Underwriting.

Step 5: Final Processing.

Step 6: Final Underwriting.

Step 7: Closing Disclosure.

Step 8: Doc Drawing.

Step 9: Doc Signing.

Step 10: Closing.

@Evelina Khaimova

Sorry to hear. That is frustrating.

I had a similar scenario about a year ago where the lender did not close in time and told me the rate lock had expired. The new rate 30 days later was now higher than at time of origination. I was able to use emails to stitch together a timeline and show the lender that I had always answered any questions or provided documentation with 24 hours of the request. So, long story short....I proved that they were not able to meet their own timeline. They honored the original rate lock and we closed within a couple weeks.

As others have said, I would have cut loose this lender and moved on after a week or two if no response. Any good professional should have an auto reply if they are truly not available for business for an extended period of time.

Document all Q&A, anticipated dates, etc in email even as a follow up to a phone call.

Pay for the extended rate lock. If they offer 30 day lock or 45 day lock. Choose 45 day lock. Several lenders are offering 60+ lock periods right now. It may only be an extra $100 to extend your lock period for 15-30 days.

Negotiate appraisal waivers regardless of good or bad performance by the lender.

If points are high for the rate you want, maybe negotiate a reduced origination fee.

Also, if you are buying (vs refi), you can often negotiate for the seller to pay closing costs. Simply add the closing costs to the closing offer. Instead of paying up front cash to close, the closing costs will essentially be financed meaning you may only be paying 20% of the closing costs with the 20% down payment or similar.

@Carl Flint

Wealth = Leverage x Mass x Velocity

@Kevin Polite

Selling to reinvest into more leveraged cashflow (2 properties vs the 1) could be the best mathematical scenario, but if those deals aren't out there right now, then maybe consider getting a HELOC on that property to make those upgrades for market rent. You can get investment property HELOCs at around 4.75% again (finally they are back...).

It might be less effort to get some upgrades done versus selling as-is and finding new deals to invest in. Your annual tax situation definitely should always be a consideration, as you hinted at.