All Forum Posts by: Dan H.

@Tyrell Perry I use the term HELOC when referring to an equity line of credit on my home. It is easy to find lenders doing HELOCs. I refer to ELOC as an equity line of credit that is not using my home as source of the equity. I include in this category a equity line of credit that uses the equity in investment properrties. When I looked into obtaining a ELOC against my investment properties a year or maybe a little longer ago there were not too many sources for this type of ELOC. So I do not refer to ELOC that uses investment properties as a HELOC (if for no other reason than they have different terms and are a lot harder to find).

I understand when someone does refer to an ELOC on an investment property as a HELOC because it is the same idea (just much harder to find and a little different terms).

Good luck

@Brent Coombs I am not worried.  I am not over leveraged (I am well diversified) and I have bought at near market highs in 1992 and 2003.   You made no inquiry to what I did with the money that was pulled out of the investment properties.   If you think it was wasted in any manner you would be mistaken.  

So you with your 25% equity will loose more than I would if I had 5% equity when there would be a property crash (at least loose more on paper) because I took money out and diversified it.  The percentage of my net worth invested in investment properties is slightly higher than what I consider ideal. 

Every property that I have owned at least 3 years is worth significantly more than I paid for it.  The properties that my family and I owned in the 2008 crash had a total of $50 rent decrease (in a total of 12 units).  I have been through a couple of depreciation cycles/crashes and I am still here and unafraid of another.  If a property crash came I will be buying more properties at a discount using money that I have previously pulled out of the properties (I wish I had purchased more properties at the last crash).

I am not going anywhere.  We purchase for the long haul.  We (family and I) have only sold a total of 2 properties and we purchased our first rental property in the late 70s (only one of the 2 properties was sold to get out (beautiful out of state property in Gulf Shores Alabama), the other was sold because we needed the money to purchase a quad plex in Pt. Loma).

So I wish I could have taken more money out of the properties but the recent refinance was at 75% LTV. Add in the investment property that I am at ~50% LTV and I wish to have a little less of my net worth tied up in real estate.

Hopefully you do not have all your net worth in real estate investments but I would understand it if that is the route you choose.

Many of the significantly below market properties bought in San Diego do not qualify for conventional financing but there are some that do qualify for conventional financing. Finding those that do qualify for conventional financing and are significantly below market will be challenging, but not impossible. To increase your odds of finding such a property you will not want to limit yourself to only the MLS. You can try driving for properties, direct marketing, auctions, as well as MLS.

Good luck.  

@Brent Coombs my recent refinance resulted in me having only two investment properties with any of  my initial investment.  One did not have enough equity and the other the interest rate was so much better than current rate that I chose not to refinance.  

I would have taken out all the equity they permitted without loan rate artificial increase because it would allow me to best leverage my investment. If I could have gotten same terms on 95% LTV I would have taken 95%. However 75% LTV was the number that provided that best rate.

So I have one property that is still a good candidate for an ELOC. Due to appreciation its LTV is ~50% but its rate is over 1% less than current rates and I do not need the cash bad enough to want that type of rate increase. So ELOC would be a good choice for being able to access the equity if I needed to but not lose current great loan. However I have not yet started recent research (I remember some of what I found out last time I looked into ELOC but for example do not remember exact lenders that did ELOC on investment properties (there were not many)).

I looked into ELOCs on investment properties a year or so ago and found there were some, but not many, that offered them (I do not know if anything has changed since then). My properties are in different price range (I invest in So Cal) but most ELOC would go to only 70% LTV. ELOC are after purchase. I ended up refinancing instead and therefore did not pursue the ELOCs. @Brent Coombs you are correct that the ELOCs I found back then were not asking what the money from the ELOC was to be used for.  

With current interest rates being low, refinancing is a viable option for taking money out of investment properties. You can also typically get a little better LTV amounts than with the ELOC (typically 75% but sometimes 80% with competitive rates).

I have one investment property with quite a bit of equity with loan rate significantly better than what I can get today.  So I may look into ELOCs again for this one property.  

@Michael Reyes Escondido multiplexes (2 to 4 units) is our expertise. You can still obtain multiplexes in Escondido with positive cash flow accounting for all expenses (and I use what many people consider to be high cap expense numbers: $300/month for SFR standard rental size, $250/month for attached standard rental size).

Some advice: 1) Do not use listing prices as a comp for Escondido multiplexes (only look at sold prices - do not think it is a deal just because it is listed lower than other listings) 2) Do not forget cap expenses in calculations 3) higher density areas usually result in more work than lower density areas 4) South Escondido is trending in much better direction than North Escondido 5) even in Escondido finding SFRs that have positive cash flow is not easy 6) Tenants in certain areas value having adequate parking 7) Lourdes is not close to as good as it was last year, it is no longer clearly the best Mexican food :=).

Good luck

I am not a tax accountant but I suggest you immediately apply for an extension if you have not.   Seeing that it is past April 15 I believe that penalties may be unavoidable but possibly applying for an extension will avoid further penalties.  Regardless there will likely be interest charged until you pay if you owe.

My tax accountant is Miles Lawrence.  You should be able to find him in the yellow pages or on-line.  He is not cheap; in fact he is likely on the high to very high price range but he has done our taxes for a while and we have a few complications.   Depending on the complexity of your tax bill a less expensive tax accountant may suffice.  I trust Miles and if I could change anything it would only be his rate :=).  So I do recommend him but warn that his rate is high (possibly very high).

Good luck

@Darren Crawford Are you thinking of this as charity?  When adding in cap expense, maintenance, and vacancies both are likely to have negative cash flow and there is no equity.   The only way this works is if you are thinking of it as you are willing to donate money to help her out because that is what you would be doing.

I think she will be lucky to be able to sell it for what she owes to a local investor who can self manage.  If she sold at less than she owes it could be worth it as managing/owning rental property takes time; it is not the same as investing in a mutual fund.   If she sold each at 5% below market it might be best option for her (and I still think that may be challenging).

If you could find a 70% rule property in San Diego that would be a home run.  I have seen 2 that other investors purchased recently that likely qualify.  Both had BP open houses.  

One had title issues that took a lot of leg work to resolve.  It was purchased for ~$125K and was going to sell for close to ~$400K but do not know what was spent on rehab but it was a little 2 BR/1 BA property.  So I would think the rehab was probably $40K-$50K.

The other has much larger pockets but it was mis-classified as a historic property.  When classification was removed and when shared cost with neighbor on a retaining wall that was a huge expense it end up being a home run.  The purchaser was unaware at time of purchase that the house was moved to that property and the historic property was erroneous.  @Justin R. was part of the BP open house.

I do not do flips but know the San Diego market pretty well.  I would not look at the 70% rule as a prerequisite as there are just too few but I would have a prerequisite that the flip should project $100K profit otherwise it is too risky (I would make an exception if you have a lot of experience with flips then maybe it can be worth the risk at a little less than $100K projected profit).

BTW we do a fair amount of rehabs on our buy n holds and we virtually always underestimate the rehab cost.  Unexpected expenses should be expected.

Hope this helps.

1. Increased rent (seems county wide)

2. In my market (Escondido multiplexes) less properties available at "correct" price (less inventory).  Those priced "correctly" are selling fast.

3. Price increase seems to have slowed over the previous few years in my market.