All Forum Posts by: Heath Thomas Jr

Hey @Roger E Terry you certainly have multiple options which doesn't hurt. If you are a recovering Ramsey listener, I would assume you realize not all debt is bad. I would put mortgage debt in that camp if you are turning a profit (or it is your primary residence). If your goal is to still pay down that debt, I would recommend at least refinancing both your investment properties. Depending on how far along you are in the 30-year mortgages, you could lower your rate and payments without adding too much additional term. In my view, rates are historically low, so if you plan to hold these properties for the long term, refi them into 30 years again to lock in low payments. I don't know what your payments are, but you could also probably take cash out of both and still turn a profit. 

On your primary, I would do the same thing so you can make renovations. Could also consider a 20-year term to lower your payment and not add much time to when you would originally have paid it off. But again, with rates where they are, why not consider a 30-year term too?

TL;DR

Option A: CONSERVATIVE - Rate/term refi both investment properties to lower rates (possibly significantly depending on your credit, DTI, etc); cashout refi for 15 years on primary to do renovations.

Option B: AGGRESSIVE - Cashout refi both investment properties to 60-75% ltv (or whatever you are comfortable with to keep net income positive); cashout refi for 30 years on primary to minimize payment; buy another property or two with additional cash you now have!

@Randy Mattila that's awesome! You should probably be purchasing in an LLC regardless. I am a little rusty on the SEC rules regarding fundraising, but you don't necessarily need to go the syndication route. You can either get money from friends and family, or I think get 3 total investors without needing to syndicate (which requires a bunch of additional legal fees). This is NOT legal advice. Please confirm the guidelines for raising money, but I know it is possible without syndicating and will be much less expensive if you have a network with some money. You are not allowed to offer a specific rate of return, but you can show them your past returns and project what you expect to make on future deals. The flexibility of real estate is what makes it so awesome...you can offer any amount of equity, an interest rate or both! For a first deal, you will probably need to give up some equity, but start putting some feelers out with people and see what would get them interested. Giving up 30-50% is common, but if you can show you have successfully been able to do this type of deal (which you have), you may find people are ok taking some more risk on you.

That is smart to take PM off your plate. However, you can explain that you already have experience/know what to look for if things are going wrong, and have a vetted Pm that you already use and is capable of taking on the additional units.

It sounds like you have already put some thought into what you are looking for and just need to polish that off so you can develop an elevator pitch and longer presentation to get some interest in a deal. Good luck! PM me if you want to chat more.

Hey @Randy Mattila, yes it sounds like you need to start transitioning to using OPM. l understand the hesitation, but did you not have some of these same feelings when you bought and house-hacked your first property? And look where you are now!

I started in real estate by asking family and investors to fund deals. I had no experience or credibility aside from what people already knew about me or how I was able to come across to them through networking. I would say you certainly have enough of a track record to get started, especially if you are thinking of starting with 5-10 units. The experience you have leasing up and managing your current properties is the same thing you will be doing in larger multifamily, so I do not think you should be concerned about having enough experience. Break down the returns you have earned from your current properties and be able to talk about them/increase them over the years. Also be able to talk about the pitfalls you have experienced and how you have resolved them. Being confident in yourself, aware enough of what you have done wrong in the past/risks in general, and cognizant of the returns you can expect to achieve are what I have found are important to most investors. I think you should be able to hit all three based on your current situation. 

@James S Tomaszewski if that is the case being self-employed that long, you could probably qualify for a conventional investment mortgage. That way you would only need to put 15-20% and get a lower rate. You wouldn't be financing the reno money, but as long as it could still appraise for $440k, you would be able to use the money saved from the lower down payment to go towards the reno.

@James S Tomaszewski how long have you been self-employed and are you planning to fix it up and immediately make it an Airbnb or where you planning to use it as your primary residence until next year?

@Matt S. why have the lenders said they will not do a cashout refi? From your post, it sounds like this is probably not the case, but are the property values under $70k? Or are the properties in LLCs?

Hey @Cody Revel all 3 options are viable depending on your risk tolerance. If you are risk-averse, do option 3 and leave your current loan alone. However, if you are considering purchasing additional properties, my guess is your risk appetite would be comfortable taking some money out of the property. My preference is a refi, especially in this low rate environment, and from most investors that sounds like the case too. You will also have more lender options to choose from for an investment refi compared to a HELOC.

@Kalem Lenard I agree with @Matthew Crivelli on a portfolio loan for the investment properties. If you are ultra conservative, just do the cashout on your primary to pay off the other loans, but doing a cashout on primary and portfolio loan on the investments could give you a ton of capital to keep acquiring assets, even if you only do a rate and term on the portfolio loan.

@Leah C Ogren you can get a conventional or FHA renovation refi where the hole in the wall wouldn't necessarily hurt you. There are the Fannie Mae Homestyle and FHA 203(k) loans that are essentially a refinance to give you the funds for the renovation and base it on the expected appraised value once the renovations are complete. They are really a great option to limit getting a personal loan or using more expensive hard money when you already have equity and are planning to build more. They do have some restrictions like using a certified contractor and sometimes needing a "renovation consultant" but the benefits still probably outweigh the costs especially if you already found out you can't handle the renovation yourself. PM me if you want to discuss more.

@Patrick Chafe $40k might not be a lot for an investment property, but it could be plenty to buy a primary house if you currently don’t have that!

I have not invested out of state yet, but I wouldn’t be opposed if I had a trusted team in place. I have considered deals out of state though and what I have found I am most comfortable with are areas within a 4-5 hour drive max so I can get to them relatively easily if I absolutely needed to.

I am not naive enough to say I know what the economy is going to do this year or next year, but I do know rates are historically low so finding a way to put money to work whether in real estate or not is prudent.