All Forum Posts by: Graham Mink

Thanks Bill S. ! My tenants have a year lease that expires in July but just told me that they are moving out today...ugh. I am currently out of the country for a few weeks and those were the only 5 pictures I had on my computer. I know they aren't the best, my wife brought that up as well. When we get back we will take new ones. Your advice is much appreciated.

lol... the quarterless people line really got me...

Hi,

One of my apartments just became available and I placed an ad on craigslist. here is the link:

http://burlington.craigslist.org/apa/4227254855.html

The next day I got an email from someone saying my ad was discriminating. I asked why and he said I can't say "no prior evictions" and I can't ask how much someone makes, as it is none of my business, along with a couple of other things like that I can't run a credit check. My wife and I had a good laugh about the income part. Imagine if you couldn't qualify a tenant based on income. How would you screen someone, check their pulse? ok here's the keys... haha

Anyway, any constructive criticism about my ad would be greatly appreciated. Thank you!

I am looking for financing advice for a spec house I am planning on building. Here are the details:

I own 5 rural building lots that I can't sell as vacant land. I bought the raw in 2005 and by the time they were ready to sell the market went south. No land is selling in the town they are located in, about 10 lots in the past 5 years and all for deeply discounted prices. In 2013 alone, 21 sfh have sold, so there is a much stronger demand for them so I am considering building a spec house. I know that it is risky to build Spec but I am getting eaten alive by taxes and interest payments and I have to do something. At this point I will be lucky to break even on the whole deal. I want to get out of the land development business and stick with the buy and hold cash flow properties that I have success with.

Here is my plan:

I have the cash to build a basic starter house on the property this spring. From doing my market research I can build the house for roughly $140k (which doesn't include the land) and sell it for $175-180k. I would break even on the construction and make $35k on the land. I have been trying to sell a lot for $30k for the past 2 years and, although I have had interest, no one has pulled the trigger. I won't sell for less than $30k for financial reasons that I don't want to bore you with the details on. If the house doesn't sell this summer I can rent it out and cash flow roughly $5k a year on it which isn't great but is better than a sharp stick in the eye.

My question is:

If I have to hold the property for more than 3 months what is my best option for financing the house to pull my money out so I can invest in something else?

My options are:

Heloc, which is difficult to find for NOO and has a variable rate.

Conventional financing as a rental, which is expensive and difficult to get.

Commercial long term financing, easier to get than Conventional but more expensive.

Are there any other options I could consider? Does anyone else have experience in deals like this?

I appreciate any comments or advice that you have. Thank you!

My bank requires 6 months reserves for the property you are refinancing and 2 months for all other properties, except your primary residence. I believe this is a federal requirement from Fannie Mae.

I would look for an equity partner. 20k isn't an ungodly amount of money and there are probably many people in your circle that would have money like that to invest, you just have to convince them and choose a good partner. They put up the cash, you do all the work and split everything 50/50.

@Grant Brewer

@John Chapman

Glad to hear others are in my same situation, not to wish debt woes on anyone!

Grant, I tend to agree with you that I can get a better return but there is risk involved with that REI. Paying off the debt is guaranteed to give me that return, plus help me sleep at night, like John said. You both bring up good points and I am still on the fence, conflicted as to what is the better deal, I don't think I can lose much either way.

@Perry Apawu

I just came across your post after posting one of my own about a similar situation. I am curious as to how things are working out?

@Edward Burns

Thanks for the quick response!

My logic in regards to your first question is a little off. Maybe I can explain a little better. If I keep the loan can I use the 15k to acquire a property that pays $300/month? Which would cover the $300/month student loan payment that I will be making for the next 6 years since I am not paying it off. Paying off the loan "instantly" gives me a 24% CoCR for the next 6 years.

It has no effect on my DTI since I apply for new loans personally and the student loan debt is in my wife's name.

The price of real estate in my area is all over the place. I may need the 15k for my next deal or I may not, that will depend on what I decide to do with the money and what becomes available.

My hesitation is that if I pay off the loans then buy a property and need to borrow $15k more to do whatever I need to do then the new rate is going to be much higher than the 2% effective rate I am currently paying.

Hello,

Looking for some input from the BP Community.

My wife has $15k remaining of outstanding student loans. Our payments are $300/ month and the interest rate is at 3% fixed (2% after tax deduction). We have some available funds right now to pay them off, and we won't need the money for anything in the foreseeable future. However, I am actively looking for properties to purchase and I have $50k to buy another property above and beyond the 15k. We pay $50 a month in interest and this amount is deducted from our taxes, so the 15k costs us $33/month in interest net. My debt eliminator self wants to pay off the loans so I don't have to think about them anymore and to improve our personal financial situation. I can look at it like a $15k investment makes me $300/month for the next 6 years(that is the remaining loan term), a 24% CoCR. On the other hand my inner Real Estate Investor says that 2% is cheap money, and that I should hold onto the money in case I need it to buy or renovate my next property which could surface in the near future. My current Big Picture Goal is to increase my passive income from rentals so I can pursue it full time. Both buying more property and reducing my monthly expenses help me get there quicker.

Would you pay off the loans or keep the money to buy another cash flowing property?

Thanks for your input!