All Forum Posts by: Corey M.

I live in Los Angeles, where property is expensive to rehab and rent unless you have a lot of money to lay out. 

I'm doing a cash out refi of my primary residence, which will net me about $200k to spend. The issue is, I need to buy a property out of state and I have very little free time due to my full time job. 

I'm thinking that Turnkey is a good way to get my feet wet, but I am confused by them. I see that there are places like Roofstock, that sell properties on a marketplace that already have tenants. And then there's places like Spartan that make a deal with an investor, rehab the property, and then rent it for them. 

Is there a reason people go with operators like Spartan, which would require months before the property is ready, and even then, no guarantee of a tenant VS Roofstock, which seems quick and already has guaranteed cash flow?

Also, it seems like most of the Turnkey properties have 1-3% annual appreciation. Assuming the cash flow meets the 1% rule, that means an investor is only making between 2-4%/yr. The stock market averages 8%, and it's more liquid. So what's the point of investing in Turnkey at all? 

I'm a first time investor with an 80 hour a week full time job. I live in LA where there are no cash positive properties. There's no time to travel out of state. I'm just looking for passive income on my dead primary residence equity. What's my best option to generate cash flow and appreciation? All the turnkey properties I look at show appreciation at 1-3%/yr. On a $100k house, that's $3000. The stock market averages almost 8%/yr. What's the value in a turnkey if it's not beating that - especially since a house is far less liquid than stocks?

Isn't that pretty dangerous for a newbie? I am taking $200k out of my cash out refi. I doubt I'm going to be able to get 10 separate loans for properties by putting down 20% for each. That would require a lender to assume I could pay $1mm back. I've never shown any income from rentals. All I have is my job and current salary. 

I'm confused. I'd do the cash out refi on my primary residence now. But while I'm waiting for it to close, if I find a property, I'd just use my current cash to pay with it. Then once the deal closes, I'd use the $100k from the refi to replace my cash so that I can get the mortgage interest deduction. 

Thanks for the feedback. I'm not familiar with the term "seasoning." What does my personal cash being used to purchase a proeperty have to do with a cash out refi? 

So if I'm understanding you correctly, if I pull $100k out by doing a cash out refi, but the refi requires a 25% ltv, then when I move the money over to purchase a property for $100k, it's essentially like I put down a 25% down payment?

If I purchase a $100k property for cash, but then take the cash out refi later for the same $100k, can I write off the mortgage interest on the cash out refi. My understanding is that the mortgage interest can only be written off if it's used directly to purchase a rental property.  But what happens if I'm simply replacing the $100k cash I put in with the $100k from the cash out refi? Can I still deduct the mortgage interest?

And finally, what are your thoughts on starting with a HELOC since I don't have a property yet and then moving to a cash out refi? At the current 3.25% interest, it seems like I'd be taking a big risk that interest rates will go up by the time I find a property. Is there any advantage of using a HELOC at this time, especially since I have enough cash to buy an $100k property outright?
 

@Corby Goade - So what happens when you buy a property in six months for $100k, which you received from the HELOC? Then you still need to pay off the HELOC, but where does the $100k for the property come from? Wouldn't you still need a loan or cash out refi?

@Corby Goade - Does a heloc have closing costs? My understanding is it also isn't always a fixed rate of return.  And isn't the term much shorter than 30 years?  Re: the cash out refi, it's would be at 3.5% interest or lower, fixed for 30 years. Couldn't I just put this in a low risk asset until I deploy the funds? 

@John Warren - I am definitely confused.  There's no cash flow in deal 1 - it's my primary residence. I'm simply trying to take the equity out of that and use it to buy a rental property.  But I don't understand how to put only 20% on a rental if you're taking the money out of a primary residence cash out refi.  Meaning, if I want to buy a $100k rental, wouldn't I have to either put 20k down on a rental and get a new loan for the remaining 80k? OR, I could take $100k equity out of my primary residence, and essentially buy the rental for cash.  But then I'm not taking advantage of leverage.  Where I'm getting confused is that I'd still be paying - say, 3.5% - interest on the $100k that I cash out, so isn't that leverage?  I'm just confused about how you only put 20% down on a new property when taking cash out of an existing property.