All Forum Posts by: Ethan Gidcumb

Hey Abe, one thing I would mention is to consider what down payment would be required with the lender you work with. It is not common that a lender will issue a cashiers check but you also mentioned that you don't want to dip into your emergency fund, so you'll need your "skin in the game" somehow. 

I hope this helps you find what people/companies you need as you put all the pieces together.

 Hey Nick, you're right; I should've proofread my post. Bringing up the NPV is a good point. 

Hey Nick,

When you're considering if it would be better to invest in a larger asset, I think it would be smart to consider the NOI of both assets and what kind of overhead is involved. Additionally, in terms of leverage, how much does the 16-unit cost?

Does the borrower have any experience?

I hope this post helps pose some new questions and inspire thought!

Hey Bhrgu, are you familiar with DSCR loans? This could be an alternative method you use if you have trouble getting a HELOC on your property that a lot of investors who use the BRRRR method use. Good luck with your investments!

"Alternatively I could go learn the typical way and deal with HML, build a network. And learn how to stomach the fees. Does the HML route gets easier when you do it a couple times? We do intend to scale out and do more in the future. Is this the best route?"

Hey Zhijie, from the perspective of a HML, yes, the HML route can get easier when you do it a couple of times. I believe it can get easier because it sounds like you are most concerned about the fee among any other factors, and, it is possible to lower the fees you pay. After working with other full-time investors, I have noticed that they either negotiate lower rates after having a history of business with a lender or they borrow a lower amount of funds so they retain more equity in the deal and the 2-2.5% fee is not as expensive as the amount charged for maximum leverage. On this note, lenders are more inclined to offer better rates/points for a low-risk investment, the lowest rate and fee I've seen is 9.5% and 1.5% for origination for experienced investors on good investments. I usually navigate this topic by asking the client what is important to them. For instance, it could be the lowest rates, maximum leverage, or closing times, etc.

Typically, the origination fee will be the most expensive cost on a project, but it is smart to keep in mind any doc fees, costs of appraisals, and costs for inspections. 

I hope this helps provoke some thought for your up-and-coming project. Good luck with your investments!

Hey JP, If I'm understanding correctly, your current mortgage would be somewhere around $350k. With that in mind, I would determine your next step by finding what about the property is giving you the biggest headache.

For instance, if the fact that the property is not performing where it should be is the headache, maybe you should tap into the Conversion profit of $650k-$950k and renovate the property. This could be a good move because then you are also creating new connections with the team you'll have to hire and gaining experience in the rehab realm. However, there will likely be unforeseen issues and costs that always go along with some rehab projects, so by no means is this the easy path. 
Alternatively, if your headache is entirely just from having to think about the property, maybe it would be better to pocket the potential $350k profit from the sale and move on. You did mention that you need the cash anyway. You would save a lot of time and costs this way, but am giving up the potential for more profit.
I hope this helps!

Hey Victoria, alternative to a HELOC, you could also use a DSCR loan. DSCR loans qualify the property based on the income-to-expenses ratio. You could cash-out up to 75% LTV and use those funds for your next investment. When calculating the income-to-expenses ratio (also known as the DSCR), you would want to consider your: Rental Income, Principal and Interest Mortgage Payment, Cost of Taxes, Cost of Insurance, and Cost of Management fees. I hope this helps. Good luck with your investments!

Hey Nolan, I couldn't find recent information disagreeing with the information I included below. But, maybe this would be a good question for a real estate attorney in your area?

According to this article I found on Chicagoland Apartment Association, posted on October 2, 2019, "Nothing in the new law says that landlords are required to allow tenants or visitors to use cannabis or cannabis products on or in their property."

https://www.caapts.org/news/

Also, on July 15, 2021, Governor JB Pritzker signed HB 1443, amending Cannabis regulation. This article that outlines the Cannabis Regulation and Tax Act explains, "The Act applies the restrictions of the Smoke Free Illinois Act on smoking cannabis, and provides that property owners may prohibit the use of cannabis by any guest, lessee, customer or visitor. In addition, lessors may prohibit cultivation of cannabis by their lessees."
Adult-Use Cannabis Fact Sheet 

I hope this helps!

Hey Mashal, you could get a private/hard money loan for these types of investments. The first part of the process would be to determine what makes the deal worth investing in, for you. You will be able to find a lot of lenders offering similar and different rates so it's important to filter what you see compared to what you want. Typically, you'll see lenders offering fix and flip loans for inexperienced investors at 75% LTV towards the acquisition of a property, plus, 100% LTV towards the renovation budget. In my experience, borrowers get the cheapest deals at this leverage, or lower. However, if you are short on capital, you may be able to find somebody offering higher leverage. But I would be aware of paying any upfront fees and it could be a good idea to vet the company as high-leverage opportunities can be places for scammers to make quick money off of first-time investors.

Hey Josh, if your property is cash-flowing, I can possibly help you with this. I'll send you a private message with more information to see if we're a good fit for each other's business.