All Forum Posts by: Eric Schultz

You might look at AHP Servicing. It’s a debt fund that comes with a 10% preferred return and your initial investment can be liquidated in about 30 days. A more advanced strategy for the long term would be to setup a cash value life insurance policy specifically designed with lower upfront costs than traditional whole life policies. The cash value will typically grow inside the policy between 5% - 8% compounding. Pay your annual premium plus maximum overfunding. Depending on how you structure the policy, you may have the funds needed for a down payment within the first year or two. To access the cash value you simply take out a loan on the policy. It’s typically 1 - 3 business days to receive the borrowed funds. Your cash value will still continue to grow on the amount borrowed as well as the amount left in the policy. The delta cost between the cash value growth and policy loan interest rate is typically 0% - 1.5%. Much cheaper than borrowing from a traditional bank. This strategy is great for many reasons: cash value grows tax free, there’s a death benefit, the death benefit is tax free, creditors cannot access the funds in the policy, the policy loan (debt) does not show up on any credit reports, and so on.

HELOCs are based on the prime rate + x% and the prime rate is variable. Private loans are usually fixed rates. Something to consider based on your anticipated timeline for paying down the HELOC. There were a few rate hikes by the Fed in 2018. It will be interesting to see what 2019 brings.

Generally HELOCs are best used for short term plays, such as fix & flips or with the BRRRR strategy. With these strategies you would be using the HELOC as a revolving line of credit with short term pay back via 1.) sale of the property or 2.) cash back refinancing into a conventional loan and holding the property. HELOCs come with a variable interest rate; prime rate + 1% is fairly standard these days.

Keep your expectations reasonable on your first flip. Whatever you think your cash reserves / contingency needs to be, double it. Look up other listings in your area that appear to be flips (recent sales that are re-listed in 90 days or less) and go walk thru them to get ideas. Focus on building your local network of other agents/brokers, lenders, contractors during the process. You will build momentum much quicker this way. Good luck!

Quicken Loans is generally not the best option. Find a local lender. I have given Quicken Loans several opportunities to beat rates & terms with my local lenders and they never can. I typically put 20% down on initial financing of deals. Quicken Loans attempts to draw you in with saying they can beat the rate of other lenders all day long; its a big sales pitch they train their staff with. They do this by modifying the down payment to 25% when quoting you the rate and loan fees so it sounds as if they are matching or beating the competition, but the terms aren’t the same. Always take caution when using a company that spends as much on marketing & advertising as Quicken Loans does. It just drives up overhead costs that eventually have to be offset by higher prices or higher volume of sales. This doesn’t necessarily translate to be the best deal for the customer.

It could be a valuable experience to participate in someone else’s syndication as a limited partner first before attempting to sponsor your own syndication. See firsthand how they put together the financials, communicate to investors, etc.

PM me if you need a trustworthy inspector for SFH’s in Indy.

Makala Lee-Norwood One option would be to invest in AHP Servicing (debt fund that is paying 10% preferred return in 2019). You can collect the monthly interest or have it automatically reinvested while saving up more funds to buy your first property. It’s basically a high interest savings account, and is fairly liquid. Initial investments can be returned within 30 - 60 days upon request.

Deciding on whether or not to sell off real estate may simply come down to answering the question: what is the highest and best use of the equity in your property?

West Coast example:

Four years ago I purchased a property with 20% down and refinanced to even a lower interest rate two years ago (break even point on the cost to refinance was reached in the first six months). Today my equity in the property is about 50%. Strong coastal market appreciation combined with DIY remodeling projects have allowed for this to be possible in a rather short period of time. Since I have lived in this property for 2 of the last 5 years, I can sell off without paying capital gains taxes. I will lose about 7% on the sale to pay off sale commissions and closing costs, but that still leaves me with my original 20% down payment and another 20%+ gain. The tools & material costs associated with the DIY projects would account for another 3%, which were paid upfront at one point and then recovered with the sale of the property. I could then re-deploy the 43% liquidated equity into the great heartland of America and buy several financed properties with $150 / door / month cashflow. Being that I'm from the Midwest, I am already investing in the Heartland this way. 

So, would doing something like this be a good move based on the "highest and best use" philosophy? Possibly...

I've purchased brand new off the lot both cash and financed; both were a mistake. 

Here's a better approach:

Buy a certified pre-owned vehicle. They are typically 2 or 3 years old on the lot and usually have some life left on the original manufacturer's warranty.

Keep the vehicle until you can accomplish 10,000 miles driven per every $1,500 you paid for the vehicle. This rule of thumb will work for any mid-grade model, such as a Toyota Camry (even with the bells & whistle upgrades).

Back 15 - 20 years ago, the rule of thumb was 10,000 miles driven per every $1,000 you paid for the vehicle.