All Forum Posts by: Erjia Mao

@Sarah Stamper Thank you so much for your advice! I echo all of your points. Good school district and the age of the house have been my top criteria. I will check out Chesterfield area. How are you looking for deals?

Hope to meet you and other investors in person when the meet up is resumed. Thanks again!

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Hi, I'm a fairly new investor in Richmond, VA. I have purchased two rental properties (1 townhouse and 1 duplex) on the west end last year. They are not the traditional type of properties investors would buy to BRRRR, but it does cash flow well ($400+ for the townhouse and $800+ for the duplex) and fairly easy to self-manage. As both me and my husband work full-time and have a young baby, we prefer properties that do not require tons of rehab and can rent out after quick fixes with good cashflow and potential for appreciation. What are some neighborhood that I should focus on in Richmond the the surrounding areas? The West End does have some townhouses/condos that meet our criteria, but it's getting very competitive. I want to ask my fellow Richmond investors if there is any other neighborhood that may have similar properties (hoping to buy some detached SFHs too to diversify). Thank you!!

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@David Acosta I really like the way you explained HELOC. Yes, it does sound like a much more flexible option. I have started my application with a local credit union. Thank you!

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@Brian G. Thank you for the explanation! Interest only payment sounds like the better way to do it.

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Originally posted by @Jerry Berger:

Hi Erjia,

Have you considered a 1031 sale of your Seattle property to fund buying Richmond rentals? I don't know how cyclical the Richmond market is, but if is a slower to appreciate/depreciate market, there might be a benefit to harvesting the large equity in Seattle at this time. This would be a play to exchange questionable future equity growth for more secure ongoing cash flow and less risk of a serious RE price retracement. I could be wrong, but it seems to me that the sentiment in the Seattle RE community is extremely optimistic about continued growth, especially considering the times we're living in. I have seen sentiment change on a dime more than once. I just had a conversation with my nephew who is a very savvy RE investor. He sold a house in Sacramento with fat equity and bought a number of rental properties with the proceeds; midwest properties with 50 years of flat line growth, that all have great cash flow. He did this to stay invested in real estate and to limit his exposure to a down cycle in equity. Best of luck to you!

I think your cousin's strategy is very wise to minimize risk and stay invested. That's what I've been considering as well. Thank you!

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Originally posted by @Stephen Glover:

@Erjia Mao after keeping up with potential legislation in Seattle for residential landlords, you might consider doing a 1031 Exchange and move out of Seattle completely while you can. For $600K you could have a couple of properties in Richmond, or elsewhere, with friendlier legislation for landlords.

With that said, Richmond appears to also be moving in that direction, but it's not near as far along as Seattle, Colorado, NY, and places in California.

This is a very good perspective to consider the overall legislative environment for landlords. My husband actually owns the property in Seattle and has some sentimental reason to keep the property. That's why we are considering other alternatives to leverage the equity of that property.

I have actually read a few of your posts. I would definitely like to connect as I'm starting out to invest in Richmond:)

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Originally posted by @Ryan Ingram:

Great post and great question. I've spent tons of time trying to figure out the differences between these two and weighing the pros and cons as well.

As most things in real estate investing, there is no right or wrong...it is situational and comes down to your intents and personal preference.

1. HELOC - This is primarily short term money. If this is a commercial line of credit, it is likely renewable on an annual basis. Which means, the bank reassesses your situation, plan, performance, financials, and then redetermines whether or not they want to continue extending this line of credit to you. If they decide they do not want to, they can call the note and request the full loan balance to be paid off OR work with you to convert it to a long term mortgage....like the cash out refinance option. The main benefit here, is that the payments are interest only and anything above that is applied to principal.

2. Cash out refinance - I personally think that cash out refinance with a fixed rate on a long term mortgage (20-30 years) headed into uncertain times is a POWERFUL place to be. Historically speaking, (from what I've been told) banks don't tend to call performing mortgages in the midst of a crisis. So, if you can recapture the equity and keep the money on the sidelines, I think you're going to be perfectly poised to take advantage of any and every opportunity that comes as a result to this crisis.

One of the things that I did specifically to brace for any and all negative blowback from this is refinance a few properties we owned out right in order to park the money.

Again, great question and I hope that is helpful!

Thank you for your encouragement for my first post:) I really like your second point. It is a very good strategy to recapture the equity while the interest rate is at historical low. I'm not sure how the market will go, but having some capital on the sideline to prepare for any future opportunities seems a good idea now.

Can you please elaborate more about "the payments are interest only and anything above that is applied to principal". How does that work for HELOC?

Thank you again for your advice!

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Originally posted by @Peter M.:

@Erjia Mao

1. You will never eliminate risk so the "safety" of investing right now comes down to your comfort in the level of risk you take with future investments.

2. I see merits in both but lean toward LOC. You'll pay similar closing costs for each but you dont have to use the LOC. But if you do use it you can refinance, pay it back, and do it all over again. Honestly its 6 of one, half a dozen of the other. Closing costs will always eat into your profits the same way whether it's a sale, purchase, or refinance.

3. Sounds about right. Lenders usually wont go any higher than 50% of equity and you shouldnt be comfortable going higher than that unless you're a super duper risk taker.

4. Doesnt matter. If you find a lender in FL with the best deal use them. But there are federal and local regulations as well as the banks internal policies that all have to match up.

All in all I vote LOC. You only pay interest if you use it whereas a refi you are paying interest again(you just paid it off!) plus the lost return you miss out on if you dont reinvest it.

Great response! I agree with the flexibility that LOC offers. Do you mean that if I have a LOC first, I can still do a cash-out refinance later to pay back the balances for LOC?

Also, I called a local lender in Richmond and were told they cannot do refinance for properties in Seattle because they are not licensed there. I guess I will do some research for lenders who are licensed in Washington state if I want to pursue refinance.

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Hi everyone, I'm a new investor in Richmond, VA. I've been reading a lot of posts and blogs here. Now I'm ready to write my first post:) I have a rental property in Seattle that has been paid off with about $600k equity. I'd like to leverage part of the equity to expand my rental property portfolio in Richmond as the rentals here have better returns. I've been considering HELOC and cash-out refinance, but I'm not 100% sure which route to pursue, especially in the current environment. Looking for some advice from investors on BP forums.

1. First thing first, is it still safe to use leverage (specifically tapping into equity on rental property) to buy more rentals during this uncertain time?

2. I have done some research online on both and understand HELOC offers more flexibility, but the interest rate is usually higher than cash-out refinance. Are there any other pros/cons and risks of both that I should be aware of to help me make a well-informed decision between the two? Or, can I do both?

3. I have contacted a local bank in Seattle about HELOC. They can provide HELOC for up to $250k because it is a rental property. Does lenders usually have similar requirements for cash-out finance? I read that usually LTV can be up to 70-75% for cash-out refinance.

4. For cash-out refinance on my rental property in Seattle, shall I contact lenders in Seattle or Richmond, which is where I currently live in? Or, does it even matter? If location does matter, I'd like to ask for some recommendations for lenders in Seattle or Richmond that offer cash-out refinance for investment property and have competitive rates.

Thank you for reading my first post on BP!

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All Forum Posts by: Erjia Mao

Erjia Mao has started 2 posts and replied 9 times.

Post: Neighborhood to invest in Richmond, VA

Post: Neighborhood to invest in Richmond, VA

Post: Cash-out refinance or HELOC

Post: Cash-out refinance or HELOC

Post: Cash-out refinance or HELOC

Post: Cash-out refinance or HELOC

Post: Cash-out refinance or HELOC

Post: Cash-out refinance or HELOC

Post: Cash-out refinance or HELOC