All Forum Posts by: Franklin D.

@Franklin Dowhower I am changing my strategy to only BRRR properties in desirable location and selling everything else. Once I reach my gross rental income I am going to shift into paying off those properties.

Someone else mentioned trying section 8 to increase the cash flow. That is a good idea as well.

I was running the numbers on a good BRRRR and leaving more money in the property on refinance. A big issue is I meet my numbers on the mortgage and taxes but repairs and cap. exp. kill it.

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Quote from @Andrew Syrios:

Quote from @Franklin D.:

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Quote from @Andrew Syrios:

Those property taxes sound brutal. But I assume the loan costs are tough too. It's really hard to BRRRR in this rate environment. You'll probably have to leave some money into the property. Although you should challenge the property taxes with the county I would think. Perhaps they have the house valued way higher than it should be.

Thank you for the reply,

Property taxes are definitely insane. I have co-workers who have challenged the value and few have succeeded. The values are actually accurate to market rate of the houses. I am curious if the sudden high property tax values here will raise rents due to even less people being able to afford to purchase with high rates combined with high prop. taxes, and landlords having to compensate for higher property taxes.

I have also looked at purchasing with the plan to refinance whenever interest rates go down but that is unpredictable. It would also mean paying another round of closing costs. It would save 150 a month but take 55 months to "pay back" closing costs.

Did the taxes just all of a sudden skyrocket? If so, yeah, rents will probably go up some. But if this has been a persistent problem, I wouldn't put any stock in that. I would challenge the taxes but if taxes are that bad, you may need to look elsewhere to find a cash flowing property

Texas being a no income tax state they are constantly re-apprasing to get the most property tax they can. I agree somewhere else would be better, I just don't understand if I'm missing something that allows others to invest here.

Yeah, I have some friends in Texas who complain a lot about the property taxes, especially since they reappraise on sales, which I've seen completely ruin a pro forma or two

The biggest issue with property taxes is they're unavoidable. Where as with income tax you write off losses.

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Quote from @John Morgan:

@Franklin Dowhower

Been there done that. And I'm in Texas too (DFW area). I've been in your situation a few times and it's rough breaking even at first after leaving 20-30k in a BRRRR. However, market rent has been coming way up here due to rising property taxes and insurance. There's not a ton of buy n hold investors in Texas for this reason so rental inventory will remain low. Most people flip and make their 30-70k after a few months and repeat flipping. I like to hang onto my properties and after a few years they've been looking like home runs. But at first, they're all base hits. If you don't need cash flow right now, then I'd plant that tree and wait for a few years to refinance or sell and do a 1031 exchange to scale up. Patience is the key if you can afford to wait.

This was exactly what I was looking at. Would like but don't need cashflow, flipping taxes are hefty so holding and renting for a few years avoids that and then 1031 into something bigger. Appreciation looks good here on the right property.

Thank you for your thoughts.

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Quote from @Jacob Stevenson:

Taxes are doing the same where we invest. Rents have increased substantial amounts as well though so rentals still cash flow. What is keeping rents low in your area?

They aren't super low rents, mostly super high taxes, but likely income.

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Quote from @Nicholas Covington:

As a lender that works with many investors, alot of my people are offloading their properties at this point just to get their cash. You're right it's very difficult to cash flow at this time with today's rate.

Regarding the 12-month rule, you can get a DSCR loan that is offered for rental properties. Most lenders require normally 3-6 months instead of 12.

What do you/they see as an alternative? I would prefer to keep my assets local to me. Real estate by far has the most benefits, the only option I see to stay local is to ride out barely scraping by until rents surpass my mortgage costs.

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Quote from @Andrew Syrios:

Quote from @Franklin D.:

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Thank you for the reply,

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Quote from @Stephanie P.:

Quote from @Franklin D.:

Jackson,

I just asked my loan broker about this today. You should find one in your area (more than one) and ask them.

According to mine if it is 100% your cash you can cash out refinance at any point. If you borrow any amount from say a family member you have to wait 6 months. Take what I said with a grain of salt. There is very little information on this and when I called multiple lenders/brokers some of them didn't even know about the extension to 12 months.

-Frank

Frank,

Welcome to BP

If your broker told you "it is 100% your cash and you can cash out refinance at any point" do yourself a favor and find a new one because that statement is woefully incomplete. There is a ton of that information out there and easily found with a quick Google search about cash out refinance. An entire segment of the industry has grown up as a foil to conventional guidelines, so to say there is very little information on this is just amazing to me. To correct your broker, just because it's "your cash" doesn't mean a bank/lender/broker has to lend you theirs. The correct statement would be 'If you pay cash for a property, if you credit qualify, you can finance a loan using the purchase price as the value, up to (whatever loan to value they're willing to give you) without seasoning.' https://singlefamily.fanniemae...I've linked to the Fannie Mae eligibility matrix to see the max loan to value percentages. You won't get 100% of what you paid back out and they won't use the appraised value for conventional financing until 12 months have gone by. Here's the .guideline from the Fannie Mae seller's guide.https://selling-guide.fanniema...

Thank you for the reply. That was definitely a blanket statement now that i look at it. What I meant about there being very little information is that I have not seen many people talking about the seasoning requirements going from 6 months to 12 months on a property purchased with a loan and then cash out refinanced. I also was assuming people knew that no one had to give them a loan. I also assumed the BRRRR method was being correctly used and they were generating equity over what they spent to obtain an LTV appropriate to bring all their cash out.

Your second link has a condition "The above ownership policy applies in addition to the requirement that an existing first mortgage being paid off through the refinance is at least 12 months old." With the all cash method would there have been an existing mortgage?

In another Fannie Mae guide with a section specifically about "Cash-out refinance Mortgage on a property owned free and clear" I found "At least one Borrower must have been on the title to the subject property for at least six months prior to the Note Date"

I am really glad that professionals like you take your time to answer and correct questions/answers on these forums. It makes navigating these conditions and changes much easier. Thank you for your time.

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Good evening,

Let me preface this by saying while I'm not new to bigger pockets I am new to implementing these practices.

Good work on the numbers it looks like. Always be conservative. Start searching for deeply discounted deals. Contact realtors, wholesalers, join Facebook groups (REIs, investment groups, real estate groups), search the Facebook marketplace for deals, look at Craigslist, and ask everyone you interact with (get good at idenitfying scams for all of the methods). Be patient, when you see the right ball hit it out of the park. Analyze every deal you can find until you can analyze them just by looking.

Even if you find a good deal be willing to walk away and not get attached.

Find a mentor with properties and find a way to add value to their life in exchange for information.

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Birmingham, Alabama

I agree with the two above me.

While a 4th bedroom would rent higher and retain tenants longer it will take longer to rent out at the higher price point. In my opinion.

Large families are becoming far less common.

Two full bathrooms would likely add more appeal than a 1 1/2. A quick Google search returns mostly results of bathrooms adding more value if square footage is not altered.

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Jackson,

I just asked my loan broker about this today. You should find one in your area (more than one) and ask them.

-Frank

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All Forum Posts by: Franklin D.

Franklin D. has started 1 posts and replied 12 times.

Post: BRRRR no cashflow

Post: BRRRR no cashflow

Post: BRRRR no cashflow

Post: BRRRR no cashflow

Post: BRRRR no cashflow

Post: BRRRR no cashflow

Post: Cash Out Refinance - BRRRR

Post: Looking to do my first BRRRR

Post: Duplex BRRRR Layout: WWYD?!

Post: Cash Out Refinance - BRRRR