All Forum Posts by: Hal Davis

Thanks for the responses Jason & Eric.

This is an owner occupied mortgage on the warehouses through a local bank, not an SBA loan.

Any conservative investors out there want to make a case for keeping the cash?  Would like to hear a counter point to the more popular opinion to refinance and re-invest.

Thanks!

I have the opportunity to refi two warehouses appraised at $1M and pull $800k in cash out at 3.34% for 15 year fixed (no balloons, ~$5k in closing costs). 

Total gross rent: $9550 / month

Property Tax: $14,000 / year

Insurance: $7,000 / year

P&I on loan: $5,700 / month

Maintenance Fund: $500/month

Currently, Cash flow is $9550 - $1750 - $500 = $7,300

Projected, Cash flow is $9550 - $1750 - $500 - $5,700 = $1,600 with the initial principal payment of $3,450 

I have 20 doors in residential SFR, Duplex, Triplexes. This would take me up to ~50% leveraged on my entire real estate portfolio.

I believe there will be a buying opportunity at some point in the next 18 months due to this COVID.  No idea what I think about inflation/deflation and its impact on USD, but it will be hard for me to be convinced that a significantly lower interest rate will be available later.  So, having more cash to buy foreclosures or quick cash closes for 'motivated' sellers is attractive.

12 months from now I'll move to full time real estate investing / work optional and curious what BiggerPockets thinks.

I've put a lot of thought into this to try and get an edge.

My Real Estate Attorney friend is preparing to pivot his business model to process foreclosures because he believes there will be a flood coming.

My friends in banking seem to think the loan modifications and government's bailouts will prevent things from getting too bad (like 2008).  Say they learned a lot.

Printing $2T along with super low interest rates should provide upward price pressure.

The economic impact from COVID seems to be really impacting people lower on the economic spectrum. 

I still cannot believe that this virus will come through and we pause the world with no major negative economic impact.

So, I'm playing my game with tighter qualifications for acquiring property, while selling some of the properties that were acquired less strategically and more opportunistically over the last few years.

Edward Jones has a money market account that returns 3-4% but has a $100k minimum. Maybe something to look into.

I'm late to the game on this thread, but I'm seeking out information on how to actually operate in a post-financial freedom life.

Goal: $20k / month in passive income

Today: $10k / month in passive income

I have the cash to buy rentals and reach my goal, just waiting on foreclosures / looking for deals / trying to create deals.

Questions for those living primarily on passive income:

1. How do you handle health insurance?  We have two kids (3 and 8) and that eliminates us from concierge healthcare, or atleast those available in our town.

2. What tax games are you playing?  I will be spending <500 hrs per year on real estate to avoid self-employment taxes. We'll have one company car and expense appropriate items.  I play by the rules, so minimizing taxes, no shady stuff. Thanks.

3. How do you structure your entities? We currently have 2 LLC's (one for residential properties and one for commercial properties). Will have a holding company with these LLC's in order to further insulate our personal wealth.

I am 53 weeks from becoming work optional, so I have time, but this information seems VERY scarce.  Easy to find information on how to become financially free, difficult to find how to solve the issues above.

Thanks!

Hello Brady,

I am a buy-and-hold investor in Rome, Georgia.  We aren't as rural as the counties you are talking about, but thought I'd pitch in.

A few things I've found (I have 12 properties with 15 total units in Floyd County):  

-Nothing that rents for <$550 / month, Tenants are just not good at paying.

-Forget MLS right now, but there are lots of old mom & pop rental owners that may be looking to exit. I wrote letters and ended up buying a triplex from a couple who couldn't maintain the property anymore and the wife was too nice to collect rent. Lots of work on these types of property, but atleast you can force some appreciation. I also bought an owner financing note from them that wasn't getting paid on, foreclosed on it, and the borrower sold the house and paid off the note (100% gain in 3 months).

-I may buy a cabin to rent on AirBNB because my wife and I like to rent cabins to get away and it would be nice to have our own.  Maybe consider that instead of long term tenants.

-Major employers seem to be healthcare, so if there's a hospital you can get quality tenants in rural areas.

-Small towns seem to be dominated by a few locals with money who have been investing in rentals for decades.  Maybe reach out to take away some headache properties from them, clean them up, and make them work for you.

Of course, who the heck knows what is going to happen with this virus / foreclosures / job markets / housing markets.

Investing is going well. I'm currently renting all 7 SFR's that I own and flipped a pretty crappy duplex that worked out surprisingly well.

I’m starting to get wind of off-market opportunities as the network grows and people know I actually do have money and close on deals that are good.

Hello Thomas,

I am in Rome. I own 4 SFR that rent for $650 - $850 (all in Rome). What are your goals (buy-and-hold, flip, wholesale, etc)?

I am a buy-and-hold guy, but would do a flip if it made sense.  I have a good property manager if you are looking to buy-and-hold.

My advice:

If you are set on paying down debt rather than investing in a cash flowing property.

1. Create a spreadsheet and generate your own amortization schedules for each loan.  

2. Add an additional column to allow you to make additional principal payments and analyze the impact to each loan.  If you are going to make a $50,000 payment, your location in your amortization schedule can be more important than the rate or remaining principal. 

Any advice on how to best execute / finance this deal? My previous deals were cash purchases and a traditional mortgage. I have the cash to work this deal as described below, but would like to hear any advice from people with more experience with this kind of deal.

I currently have 3 SFR (3 bedrooms each, 1.5, 1.5, and 2 bath) and have an opportunity to purchase the following package:

5 duplexes, all 2 bed, 1 bath.  9 units rent for $550 and 1 rents for $475.  All together, they need $12,000 (one roof, some HVAC, etc).

2 SFR (both 2 bed, 1 bath in the same neighborhood as one of mine) that rent for $550 and $475. Combined they need $7,000 for HVAC.

The combined tax appraisal total for all properties is $470,342 and that seems low for the market values.

Total monthly revenue: $6,450.

Insurance for all properties is $2,700.

Property tax for all properties is $6,300.

If I can get the properties to appraise high enough, I could get the deal with little money down.

Assuming appraisal comes back at $480,000, 5.5% on a 15 year loan, $3,500 in closing costs, 6% for property management (using my current PM) I'm looking at $2,170 / month cash flow; $1,400 / month principal paydown; 43.7% CoC return; and 71.5% total return on $59,500 cash outlay.

In case you are wondering, I know the guy looking to sell.  His partner died and his son inherited his half and has been a challenge to work with so they are looking to liquidate.

Thanks in advance!