All Forum Posts by: Greg Gaskill

@Kevin Romines Yes sir, you are making an important point about HELOC, in that you only pay on what you use. My concern with cashing out a ton, is the cash sits there until used while I'm paying on it. Currently, our portfolio of 10 properties/26 units averages 36% LTV (1 at 24% LTV skewing the rest), which is a result of not BRRRR'ing them - long story, but I really want to get that cash out to re-invest. I've explored a portfolio loan with cash out, but unfortunately due to the massive amount of cap-ex and repairs working with Rental Certification through the city, we're just now entering positive territory with cash flow. Pro-forma numbers look great, however lenders are wanting more history which isn't there yet. Perhaps individual HELOC's per property would allow those who have stabilized to receive a line, those who need more time can come later?

If either you, or @Greg Scott have any suggestions I'm all ears!

Thanks a ton for your input.

@Greg Scott - Oh, it is sooooo nice to hear your words as they are what I was trying to rationalize. You hit on all the things I was starting to feel, but recognizing I have been wrong before kept me from acting on this. Thanks a ton for your input!

Recently I've wondered why I felt low LTV was better as an investor for long term survival. You don't want to be upside down or over leveraged if/when the markets change. But, that would seem to only apply if / or when you sell, or if the rental market tanks and revenues drop significantly.

So, if I have a sufficient cash flow and DSCR at or near 2 after refinance and cash out bringing my LTV to say 85% or 90%, and use the cash out to have greater capital reserves, and to re-invest in properties for additional cash flow, then why would this would be a bad thing?

I mean, if markets tank and the values of my properties have sunk, that doe not necessarily mean my rental revenues have tanked too, or at the same %. So if I still remain cash positive after mortgages paid I am not in danger of default, and if additional properties are bought with the additional cash out - say from 75%LTV to 85% LTV, then I've built additional security against default. It would seem that if rental rates plummet, and now my cash flow is negative, but I have greater cash reserves to survive such a blow, survival would be limited until either I run out of capital, or rental revenues improve.

Could there be a clause in a mortgage which states if the value of the property drops below the value of what it is mortgaged at the lender can take possession, or call the note, or change interest rates?

Looking forward to hearing from some of the pro's out there!

Ok, so playing devils advocate (I've always believed in low LTV for safety), and out of curiosity; If you only lose money when you sell and make when you buy, and I have no plans on selling during the downs of the up and down cycles, and if my cash flow is unaffected / unrelated to market value swings, and I keep more money in reserve should I over leverage and push LTV to say 95% - is this a bad thing? Am I safer at say 65% LTV or just missing out on an additional 30% cash out to use in various ways, including security against future problems as well as investing for more cash flow? Having more money with which to work is a good thing - spending all of the recovered equity or having no reserve would be bad business practice anyway. Perhaps there is a formula of what amount of reserve will cover yer *** as a percent of revenue based on # units? Is there some hidden clause of mortgage which states when LTV goes beyond 100% or ? as a result of market correction / cycle they can call the loan due and as said previously - shut down your investment plans for good? It would seem cash flow may be impacted some (market value seems untied to rent value), but it seems likely that I'd continue to pay my mortgages, and unless the banks want to be difficult, they would continue to accept my on time payment.

It's only when you sell that you take a bath. For buy and hold regardless of what market value does, my costs remain the same, and unless I am forced to reduce rent then my revenue remains the same. And by buying right, my rents more than pay for the mortgage, so there is room there for adjustment and still remain healthy. 

If I'm missing something, please chime in!

@ Peter 

@Peter Stewart As you mention, it seems there are several advantages to purchase and rehab with cash.

My question is; What types of lenders / loans finance a property you own 100%? Last we tried this with our commercial lender (portfolio loan), we were offered a LOC, but with variable rate this does not seem a good alternative.

@Patti Robertson - Wow! Thanks for this great information Patti.

@Mac Justice

Yes, pet urine soaks into walls, flooring, and sub-flooring and until you reach the place where it exists and kill the bacteria, the smell will persist and you will have to do it again. I know it is not fun, but you have to expose the surface which contains the urine, and spray with pet urine killer - about $30/gallon. My experience with a personal home that had 18 - yep, 18 cats before we bought it, and we treated it  with a product I got at Pet Smart which kills the bacteria. Sprayed it on wood which reeked of cat pee, and immediately it changed the smell to wet wood - the smell of a branch of wood in the rain. We removed all carpet and pads, and all wood trim at floor, then using a garden sprayer, sprayed the floor and trim moulding, and on walls 18" up from the floor. Went back to a couple spots a second time, just to make certain it didn't come back. Was amazing how well it worked. Lived in the house for 3 years afterwards, and even in the heat of summer never smelled again!

Getting ready to attack a smoker's left over smell in an apartment, and will try the Ozone machine as others have suggested.

@Patti Robertson, & @Garrett Pearson - thanks both for great information. I've been wondering the same, and have also wondered what benefits the section 8 tenant may bring? Given, inspection and government watching over your shoulder may be a slight deterrent.

@Ross Kalmbach - Sounds like a good idea. Where are you at in your research?

Hi David - I'm curious how you made out with your plan. Were you able to pull this off?