All Forum Posts by: Hoan Thai

Money seems to always be the thing that holds people back from investing. It's an oxymorons, if I had money I would invest but I don't have money because I don't invest. Well there are little secret money pockets people overlook. One is your credit card. I got the idea when my back was against the wall, my investor asked for their money back on the due date and not be reinvesting because they were buying a house, I was completely cash-poor because it was tied up in the construction of a property, and I hadn't refinanced out yet. I said I will pay them back on the date agreed then I scrambled to find the money. That same day a letter came in the mail with credit card checks. I usually throw them out without even reading them. This day was different...obviously. It read that I could use these checks to pay off whatever I needed at 0% interest for 19 MONTHS!!! The was a 4% fee I would have to pay up front, but could roll that into the loan. I wrote myself a check for $20,000 and paid $800 for it. The 4% fee breaks down to 2.52% annual interest rate when taken over the 19 months. That was actually way less than what I was paying my investor so I made out by using my credit card. Another thing I did was increased my credit limit prior to writing the check so I would still have credit on my credit card to buy stuff. Since then I've increased it one more time. I plan on using and paying down a second card and ever so slowly increase that limit as well. Eventually I will have over 6 figures in buying power from credit cards alone. ATTENTION NEW INVESTORS: Just because you can afford a deal doesn't make it a good deal. I still invest a lot of time and money into my education so that I know what a good deal looks like and when one comes around I do a lot of due diligence to make sure it is a good deal. Once you feel comfortable in identifying a good deal now money won't be a barrier to closing on it. 

I created a very detailed spreadsheet and asked multiple contractors to verify the cost of the various items and then presented that spreadsheet once completed 

My first deal was a 6-unit apartment building that I bought for $38K, rehabbed for $120K, got an ARV of $285K, refi'd at 70% LTV, paid off my hard money who charged (6 points and 16%), put some money in my pocket after the refi and have been collecting rent on the 6-units since 2011 ($3400/month).

@Karen O. is right on! The refi may be as high at 80%. The original lender (hard money person) need their points and interest paid (1-6 points, 10-22% interest). Also they would also probably only finance up to 65%-70% of the acquisition and 65%-100% of the rehab (these figures for the hard money do vary widely as I am stating). The acquisition had closing cost and the refi had closing cost. 

Acquisition: $20K + $6K closing cost

Hard Money(75% of $60k): $900 @ 2 points and $2700 @ 12% for 6 months

Utilities: $600 (guess)

Insurance: $1000 (guess)

Refi cost: $3000 (rough guess)

ARV Loan = $150,000 ($200K @ 75% LTV)

Math time: $150K - $60K - $3000 - $1000 - $600 - $900 - $2700 - $6000 = $75,800

You will have $75,800 to do another deal and this time you won't have to go through the hard money lender and pay their points/interest. Sounds crazy that this works but it does. You will have to personally guarantee the refi loan and maybe the hard money, but with numbers these good you have a lot of cushion for mistakes and miscalculations so your risk is much lower. 

I just got back from day 2 of the Rich Dad seminar taught by Elite Legacy Education. Our instructor Trevor Evans showed us what they call "Double Principal" payments. This is NOT the same as paying two mortgage payments. The premise behind it is that you pay your regular mortgage payment (principal + interest) and you include next month's PRINCIPAL amount. If you pay the principal payment at the beginning of the month you don't get charged with the interest you typically would. If you simply sent in a check and tell them to apply it to principal you will NOT get the same result because you will still be charged the interest in the second month. Your additional payment must match the principal amount of the next month or they won't know what to do with the money. To get that amount you have to create the amortization schedule and skip every other line (diagram below). This is huge if you really understand the concept. The down side is your monthly payment is larger and gets significantly larger as the time goes on because of the flip flop of principal to interest. I found a website who called it modulating payments. 

Here is their explanation of it 

"At the beginning of the loan we owe the most, thus the interest payment we owe is the highest, so the amount of the monthly payment that goes to principal is the lowest. Indeed, in Month 1, next month's principal payment (Month 2) on a 30 year at 6% on $200,000 is just $200.10.

So we are budgeted for $1,688 (the 15 year amount), but let's consider that we pay only the minimum due plus next month's principal: $1,199 + $200 = $1,399. We're under budget!

Now Month 2 arrives. But we've already paid that month's principal. You can just cross a line through that month—interest and all. We would have owed $999 in interest for that month, but because we paid that month's principal just one month early, that $999 in interest is completely wiped out. Zero. We spent $200 one month early and saved $999. That's a good deal.

It is important to note that the $999 savings is only realized, non-inflation adjusted, over the full scheduled term of the loan (30 years). If we pay off the loan early and exit the game we won't see the entire savings. We may think that if we pay $200 thirty days early, then we save only 1/2% of $200 or $1. That is the case if we repay the entire loan at the end of that month and then call the whole thing "quits." But for each month we do not pay back the entire loan, the savings accrue. By paying the $200 thirty days early, the entire loan payment schedule shifts forward one month—so now we will be paid off in 359 months instead of 360 months, etc., etc. That is why in Tip Number Two we think in terms of our total savings, over an entire life's payment span of 15 to 30 years, regardless of the number of mortgages."

I hope someone finds real benefit with this. I know I found it nifty. I also figured out how to calculate it in excel if anyone is interested.