All Forum Posts by: David Roberts

I have never been a person to use credit much.  Always viewed debt as bad, until I realized how it can be used in a good way especially when someone else isn't paying for it.

So this was my first full year involved in buying real estate. I bought one house in all cash with my own money, rehabbed it with a 0% credit card and got the house rented. Not a week later another deal came along and I purchased it with a HELOC from my primary residence and opened a 2nd 0% credit card, knowing I'd need the extra money since I was still carrying a large balance on the other card. I was surprised to find my credit score plummet substantially, as I have never missed payments in my life. Rude awakening I suppose.

HELOC limit = 75k. Balance 57.6k

0% card 1 limit = 16k.  Balance 14k (I get cash back and so I pay the contractor like this, then keep the card from going over limit for now until this last rental I bought is done and rented).  Promotion ends July 2016

0% card 2 limit = 6.5k. Balance 6,435.   Promotion ends October 2016

My exit strategies for both houses are to 75% cash out refi after 6 month seasoning. I'm in the process right now of cashing out of the first one...paperwork in process, appraisal is getting done this morning, and I'll be closing on it hopefully early january. I plan to cash out 75k, so I will put all that money back into the HELOC. When this lender ran my credit it was around 700, and I took pride in my credit rating being 814 early this year (before I had done all this).

So, now I'm not going to get the best rate (~5% instead of 4.75, not horrible) and I'm going to pay 800 more in closing costs.  

Does it make sense for me at this point, to max out my HELOC and pay those credit cards down to about 30% of the limit? I could do that with the click of a few buttons. The HELOC rate is 2.99% annual until the end of the year, then becomes variable, but should be around 5% or probably a bit less, and it's interest only for the draw period (which is perfect in my opinion for my exit strategy).

Oh how you don't know what you don't know.  Experience means everything. 

 I figure that after I cash out of this house, I will do everything to make sure before I cash the next one out (eligible around April 2016) that my score is over 740.  And I figure maybe from now until then is the time to 'train' the credit scores, and bring my credit cards down to 30% of the limit, keep them there, and request limit increases even though I likely will not use these cards again unless they give me a 0% promotional opportunity.

Does it also make more sense, on the next house for example, open 2 or 3 0% cards that I could spread say, 15k across and have all the balances remain 30% or less?  Or will opening too many new credit lines also hurt?  

I had a big year this year getting my real estate business going.  It started with a google search and finding this site, then finding out someone I work with had 5 rentals and was on his way.   I picked his brain a lot with how to get started.

I then found Joe V. and the folks at the Ann Arbor REI club, which really saved me from a bad deal early on and helped to get my education on par very rapidly. From there I began acquiring rentals all year and haven't looked back. Now I get to watch others that started around the time I did become successful and that just motivates me to learn and grow with them.

Most people won't know that I am thanking them, because I read a lot of posts here when I have questions or want to see what others are doing with a particular situation, and a lot of times I don't post or say much.  But, you folks on this board have been no less than integral in helping slingshot my business this year.  

From the podcasts, to the blogs, to the lengthy discussion/debates in many threads...

I appreciate it, and I am wishing everyone a Happy Holidays.  Thanks for taking time to help others.

If you want to scale fast then you will want to lever as fast as you can. For me that's the best reason to leverage.   Real estate offers a unique strategy: buying right enables you to rehab the house, cash out every dime you put into purchasing and rehabbing, and still paying you a few hundred a month in cash flow,  and then going on to the next one.   Can't do that with stocks.  Cashing out also is a non taxable loan of which your tenant pays back, and you get all the writeoffs as well.   Its a beautiful thing. 

Its a warm fuzzy feeling to own houses outright, but that means you are waiting years to get all your cash back, and the market is always changing.  And the return is what the loan interest rate would be.   Someone already said it, now is the time to be leveraging.   Its too cheap. 

Get burned a few times in the stock market and then ask yourself if you really want to leave your money in. 

Hi Dan, there are great returns in SE metro Detroit area (not Detroit city).

Buy 50k, rehab 15-20k, ARV 90-100k, and these are good areas, homes built in 50s. I have 3 with these numbers all rented for 1000-1150, with debt im netting 430 or so a month. The next level is buy 70-90, fix and worth 120-150. Built in late 60s early 70s These rent for 12-1400. I have one with these numbers. I collect about 380 a month off of it. Appreciation us stronger for this rental due to the market like others have said.

There are areas around that have the lower price points and there are investors that like those.   Lower entry and better cash flow as long as things work well.

If you do anything from a distance just be careful who you deal with. 

 Compound interest?    I can't wait to get there. I'm able to buy 2 rentals at a time then cash out refi.  Trying to get to doing 2 rentals and a flip,  or 2 flips and a rental.   

That's so cool

When joe said without an inspection,  he means he looks at listing pictures and makes his offer. If its accepted,  he will them go to the property himself and do his Walkthru.  If he doesn't like it he will back out before the inspection period ends.  

Joe is experienced so its not worth his time to get out of his chair until an offer is accepted.  Those guys have been in enough houses to know what its going to look and smell like before they ever get there.

they already said it, but if you pay the bill you get the tools.   But why don't this contractor have a couple wenches?  That's all you need to repair the drain and a faucet!  

To not make a big deal and lose rapport, i would thank them but tell them anything in the future will be rejected per the lease. 

i have a guy.  His own company,  no overhead,  does his own installs, works on referral only.  He's licensed and insured and does not take money up front.   If you want his number text me (number in my profile) or PM me.

I don't know of any in Jackson.   Sorry my friend.  

just talked to an appraiser about this.   She said they will look for a good comp no matter how far away they have to go if nothing is nearby.