All Forum Posts by: Brian Garrett

@Daren D Wagner it really does not have to be right away. In my case my interest rate on my HELOC is prime minus 1%. It is way better then anything else I could find. Therefore, I take my time to look for the best rate and terms for a loan on the building. I then uses those funds to pay down my HELOC so I can start looking for another property and look like a cash buyer again.

Thanks Ken! How can I learn more about Subject to?

Great story! Thanks for sharing. I am in the middle of my first BRRRR. We purchased March 1st. We are in the process of repairs while keeping tenants in place. Once we can take out a mortgage, we hope to do any where near as well as you. You are an inspiration.

Thanks

Is there a benefit to doing such if they can still cash flow at the 70-80% LTV?

@Brian Garrett [refi for sudden deal] "just do it at that time" - you obviously have never financed anything, haven't you? ;-) The hoops you have to jump through, the paperwork, the (stupid) questions from the underwriter, the overlays, the... it takes a long time! Deal long gone by then.

And again, these are options. Everybody needs to chose what they think fits their situation best. Could be one, could be the other, could be a combination of both. Or none of it. ;-)

I would refinance once you have 30-40% equity in the property in order to lower your monthly payment. 

@Brian Garrett I really depends on the lender and your personal situation re terms.

But with a mortage you always (at least in this world) have an interest payment and typically also an amortization, i.e. payment on the principle. If no payment on the principle, there would be a balloon payment due at the end of the term. Since you received the money right away, your (monthly) payment starts at that point. Until the term is over. If you don't pay, you default, will be foreclosed on and lose your house - does ~2008 ring a bell? ;-)

For a HELOC I again give you the example of a (secured) credit card. Do you always use all available credit on (every) credit card? Hopefully not. So in that case you're not using the line of credit and therefore no interest will be due (and obviously no payment at all if you don't use any credit). That's a (HE)LOC. You use the money if you need it and pay it back if you don't. Merry go 'round. You pay, apart from some setup fees and possibly an annual fee (see above: depends), only when and as long as you use the money. A mortgage cannot simply be paid back and then paid out again. Doesn't work that way. A (HE)LOC does. But: you can also default, of course. But it might not be a recourse LOC, although it typically will be - lender wants a collateral for safety, obviously. You secure it against a property. The property therefore is at risk if you screw up: you owe money to someone!

I'm the best example with respect to these two options: I'm doing cash-out refis when I know that I want to expand my portfolio for sure in the foreseeable future. But I also have LOCs where I currently don't need the money in my account (which would cost me money in interest, especially since the money in the account wouldn't pay me any interest in this environment). But I'm ready to draw on it should an unexpected deal come by where I'd then use that money to jump in. Again, similar to a credit card that you pull out when you see that shiny new 65" TV that you had no intention of buying and also don't have the money sitting in the account. Alas, that's my Porsche example: I'd use my money to make me more money. Not waste it. ;-)

Options. Suitable for different situations.

 You are assuming that all markets are equal...and they are not.  There are many markets where those numbers can be found across the country.