All Forum Posts by: Brian Garrett

@Brian Garrett, I have to say that you did a way better job of giving a very through description more so than most newbie intros! Welcome to BP nation, I cannot agree with you more that this site hands down is the most comprehensive REI site on the planet! It in it of itself, is what I like to refer to as my personal mentor. I am new to the REI world as well. It is always encouraging to see others taking action to further their RE aspirations to higher heights. Sounds like you have a very solid grasp and foundation of what you need to do now the only thing left to do is put in the work, implement ACTION. Keep up the good work and keep us posted of your progress! Here is to wishing you nothing but the best in your 2017 REI ventures. Thanks for allowing me to share

Cash out refinance worked for me. Buying cash below market, doing some renovation got the property to appraise much more that I spend on this property. Doing a cash out at 70% appraised value, I received more cash that I put in.

I prefer cash out because fixed interest rate and I can go 30 years if I want to.

Cashing out is advantageous IF your lender is willing to cash out ALL but 25% equity. My bank will now do that for me and even hand me cash above what I put in it as I have a track record of success...hence tax free $ to live off of...so my business only pays me $13k as a full-time employee. SO, I live off tax free money I have made rather than 15% taxed passive income. I am in a location where I am able to find deals that work like that. Then, rent for one year, sell it (soft flip). Pay 15% taxes on the sale rather than the 35% based on self employment taxes that most flippers pay.

The difference between the rich and poor is the poor pay all the taxes and the rich pay nearly nothing.

@Brian Garrett sorry, I did not answer the first part of your question.  For me, the bigger advantage is that you "look like" a cash buyer when you make the offer.  That might not be a big deal in some markets, but in hot markets it makes quite a bit of difference.  The seller does not have to wait for you to get "approved" for a loan.  You are able to close much faster and take a stronger position in a bidding war.

@Brian Garrett it really depends on what you can do with your property and how much you can get back out. You need to be able to reposition your building and drive up the value of the property. Normally you will only be able to get a LTV of 60%-70% depending on your lending agency. If everything goes well: you bought the property a good price, drive the value of the property high enough through rent increases, you will be able to get a new loan high enough to pay off the original purchase price. However, if you do not have enough value in the building then you will not get enough to pay off the entire HELOC. Therefore, I use the term "drive down" because it depends on how far you can push it down... maybe to zero maybe not, depends on each deal.

@Brian Garrett the same applies to a GC. Ask him how many people he plans to have working on the project at any given time. If you feel his answer is not enough for your needs, let him know. Question why he only has two guys working on a job that requires 4+. Maybe he's not equipped to handle a project of your scope. Or maybe he doesn't value your project and is more focused on other work he has. 

Another important thing to ask your GC is if he's planning on using any subs for any of the work. A lot of GCs will typically sub out the electrical and plumbing work. Take note of this and request the subs information. If the GC decides not to pay the sub, the sub can come after you and place a lien on the property. Ask for lien releases anytime you give anyone any payment. Protect yourself! Too many stories about shady contractors out there. 

Sure.  Here's an example of one we just finished:

Our Cash in                  $55,000
ARV $80,000
We Keep                         25%
Total Split off                  75%
# Splits                             3 (25% each)
Cost of Split                 $20,000
Total Split Cost            $60,000 (our cost recovery + $5k)
NCF                              $680/month; $8160/yr
CCR for Splits 10.2%

We find it much easier to find many investors, new and experienced, that have between $10 - 25k in cash ready to do this. The list of possibles are the obvious out of staters, but also all those newbies that don't have the time, knowledge, tools, talents, credit, cash (larger), etc...but want to get into REI. This is their platform. Particularly when you consider they usually can replace that amount every year or so, which allows them to participate every year or so.

We have completely replaced almost (I never say never) 100% any refinancing or financing of any kind this way.  This is a way to both flip and cash flow the same deal, getting all (or most of) your initial cash back to move forward with...thus, following my Golden Rule #1 of 2 Golden Rules: "Never under any circumstances spend your seed money...just use the same money (cash) to infinity"

Here's something to keep in mind: 

Commercial lines of credits don't show up on your credit report (at least mine doesn't and my banker says that commercial ones don't)

If you're getting a HELOC it will show on your credit report. And since it's not a firm amount for a set number of payments, it won't be coded like a mortgage, but often it's coded like a credit card.

A big part of your credit score is determined by your utilization of your total credit. Meaning, if you have a total of 100K in available credit (credit cards, credit lines), you should ideally always keep it under 30% (30K) utilization or you can ding your credit score badly and can make it difficult to find financing for other things. 

Soooo, what I'm trying to say is that a refinanced mortgage doesn't have as much potentially negative effect on your score, as long as you make the pre-determined payments, while a credit line can really negatively effect you, if you use it to buy other real estate and use too much of it and now your score is too low and you can't refinance that property into a mortgage. 

Just some food for thought.