All Forum Posts by: Account Closed

I'm an out of state investor looking to buy a rental property in Cleveland OH. Want to start small with a duplex first. I will be hiring a property management company for sure and only considering buying in grade B or above area. I would like to learn about the experiences you have had so far in owning a rental property as an out of state investor. Has it been passive if you hired a property management company? Has it been a bad experience investing out of state? Would love to know different experiences. Thank you.

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Thank you @Chris Davidson

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Quote from @Chris Davidson:

@Account Closed a lot of great advice in this thread. Have you looked into HELOC's. Having 6 months of expenses is great, but holding cash for a roof seems overkill unless it is needing replaced this year or next. If you have had your properties for a while a HELOC would be a good way to have funds available for large capx items without holding cash. If you did this would you be able to have the 20% down you need. I don't think a secondary home loan is inline with you wanting to buy multi family.

Finally I would avoid paying off properties while trying to scale up, unless you are wanting to go really conservative and not scale quickly. However I would really think out what the cost of a premature drawl vs saving up additional funds for down payment if you can't tap into the equity of what you already have.

It is a slow start but worth it in the long run. Keep after it!

Thank you @Chris Davidson. Very helpful info! With a heloc, does my interest rate change on the property that I'm taking the HELOC on or it stays the same? I have never done it so not sure how it works.

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Does anyone have investor friendly lender suggestions in cleveland, OH area? I would like to work with someone who is more flexible with terms. I'm looking to buy a multi family but can only put down 15% as of now. If I need to put down 20%, then I will have to wait a few more months to save money. But if there's a way I can do with 15%, please let me know. Thank you in advance.

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I currently live in IL and read that Orlando, FL is a good place to buy a rental property. I would hire a property mgmt company if I were to buy one since it will be out of state for me. Has anybody done this for the first time and is it giving you cash flow? I will be renting long term, not looking to do airbnb unless thats better to do there than renting long term. Please advise. Any insights? I'm trying to choose between Ohio and Florida. Thank you.

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Quote from @Paul Vail:

Quote from @Account Closed:My goal is to one day have enough properties that will give me cash flow without me having to work a 9-5 job. Normally with investment properties, its long term wealth, not that much income in the short term.

My ideas:
-Pay off my existing investment property as soon as I can with the money from my roth and using any future savings.

You'll never be able to replace the Roth principal you pull out -- so if that Roth is earning at least as much as you are paying in investment property interest AND the investment property is cash-flow positive, the money is best left in the Roth (we need to keep in mind the tax-free aspect of that Roth growth.

-Use half the money in my roth and my other savings (excluding my emergency fund) for a 20% down payment to buy another property now and put it on rent.

This is different than the property in Cleveland? (BTW -- do you have someone known and trusted on the ground in Cleveland that can keep an eye on your investment?) Or is this a different opportunity? Regardless -- unless the cashflow % - the debt % exceeds the Roth/401k gains, then the math should suggest your path UNLESS you are also banking on appreciation*. *Appreciation is never a sure thing.

-Wait until next year to save enough for a 20% down payment and not touch my Roth, then buy a property.

@Kevin McGuire's idea about taking a loan out against the 401k? What do your normal lenders say you need to come up with for them to jump on board?

-Take a private/hard money loan now because it has less requirements and buy a property now. I'm not sure if I can only put 5% down if I use a private loan.

What's the math? Only take private money if the numbers work in your favor. Private money is pricey, but could you work the deal via cash flow with the high private loan rates? Everything is predicated on cash flow.

@Paul Vail have you ever borrowed from 401k? I dont even know how it works:( I just checked my Roth. I actually lost $2k over 3yrs. It shows my rate of return YTD 2022 is negative 11%. And with Roth, I have only been contributing to it for just 3yrs and I'm not sure if I will be able to continue with my increasing expenses.

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Quote from @Paul Vail:

My ideas:
-Pay off my existing investment property as soon as I can with the money from my roth and using any future savings.

You'll never be able to replace the Roth principal you pull out -- so if that Roth is earning at least as much as you are paying in investment property interest AND the investment property is cash-flow positive, the money is best left in the Roth (we aren't even looking at the tax-free aspect of that Roth growth.

-Use half the money in my roth and my other savings (excluding my emergency fund) for a 20% down payment to buy another property now and put it on rent.

-Wait until next year to save enough for a 20% down payment and not touch my Roth, then buy a property.

@Kevin McGuire's idea about taking a loan out against the 401k? What do your normal lenders say you need to come up with for them to jump on board?

-Take a private/hard money loan now because it has less requirements and buy a property now. I'm not sure if I can only put 5% down if I use a private loan.

Thank you @Paul Vail. Very helpful info!

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Quote from @Kevin McGuire:

Hi Akushla,

It's indeed a complicated decision because of all the factors to trade off. But first, let's address your comment on "overthinking and not taking action out of fear". As a fellow overthinker I totally get that! Real estate investing has a lot of risk inherent, especially when you're getting started, and it's important to be cognizant of the risk. Only then can you determine how to mitigate it, usually through portfolio design which includes reserves, cashflow/expense budgeting, and judicious use of leverage. Understanding your risk tolerance is super important, and that fact that others here may have a different tolerance doesn't make yours wrong. Fear is the brain's way of self-preservation and you should learn from it but of course not be paralyzed by it.

To that point, it's great that you're taking the approach of having a reserve fund. This is a place where investors get themselves into trouble since repairs and vacancy can turn a marginally cash flowing property into a real personal finance problem. I always want to ensure that my investments don't create risk for my personal finances. This is especially true for you with a baby and all the ensuing costs. Plus there's the emotional stress of financial risk and I'm guessing you have enough on your plate :) Basically my advice is, don't screw up your life because you're in a hurry to acquire wealth. As you said, real estate is the long game, "get rich slowly", and the role of wealth is to make our lives better.

I'm financially conservative so take my advice in that context.

Regarding the options you outlined, personally I'd pick waiting until I had the 20% down. I'd not touch the ROTH because the effect of tax deferred compounding is quite powerful and often underrated. Plus when you withdraw from the ROTH you can't replace it, it's a one way street.

Second to that I'd consider the vacation property financing approach, but I pick that second because as you said the rates will be higher which then puts more pressure on revenue and reduces slack for unexpected expenses.

I've never used hard money but my mental model is that it's typically used for short periods with a clear exit, for example doing a fix-and-flip. The rates tend to be high (I recently spoke to someone who lends at around 12%). This just feels super risky.

Another option which you've not listed is borrowing against your tax deferred accounts. There's some discussion of that here.

Thank you @Kevin McGuire. This is very helpful!

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Quote from @Muhammad Amawi:

Quote from @Account Closed:

I already own an investment property and I had enough down payment saved up for it so getting a loan was not a problem. I'm looking to buy another property out of state in Cleveland, OH area. I want to start small with a duplex. But the problem is I dont have enough down payment to put down for investment property loans. I might only have 5% down payment. Even if I can get a loan with 5% down, my concern is how am I going to get any cash flow from my second investment because the mortgage payment will be high. Does anyone have any alternative solutions besides private lending? Thank you in advance.

Hey Akushla,

You'll need to have 25% before purchasing the investment property. Is there a way where you could leverage your current investment property by doing a cash out refi? Let me know if you have any questions on anything. I'm an investor friendly lender native to the Cleveland area.

@Muhammad AmawiIf I do a cash out refinance on my existing investment property, wouldnt that be a bad decision? Because my interest rate on that is 3.6%. Now the interest rates are close to 6%

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Hi All

I need some suggestions pls. I have one investment property so far. I really want to buy a multi family in cleveland, OH area which would be out of state for me. I have enough money saved for at least 6 months expenses which I dont want to touch. I also own a house (still paying mortgage) so I want to make sure I have enough money in case I need to replace the roof or something. i also have a baby which I will have to put in daycare soon and that will cost a lot. I also have money in a Roth and also in 401k. So besides all of those funds, I have extra $15k which is not enough for a 20% down payment. My lender said I can buy it as a second home and put 10% down but the interest rate will be high. My goal is to one day have enough properties that will give me cash flow without me having to work a 9-5 job. Normally with investment properties, its long term wealth, not that much income in the short term. So I'm thinking different scenarios. But if you have any suggestions outside of this, pls feel free to share. Sometimes I overthink and then not take any action out of fear.

My ideas:
-Pay off my existing investment property as soon as I can with the money from my roth and using any future savings. That way I will have more cash flow since no mortgage on it which I can then save up to buy another property. But it will take me at least 5-7yrs to pay it off. Then I'm thinking in 5yrs, properties will probably be high in value. So I want to buy now if I could.

-Use half the money in my roth and my other savings (excluding my emergency fund) for a 20% down payment to buy another property now and put it on rent.

-Wait until next year to save enough for a 20% down payment and not touch my Roth, then buy a property.

-Take a private/hard money loan now because it has less requirements and buy a property now. I'm not sure if I can only put 5% down if I use a private loan.

I know I'm probably overthinking thru this. But I dont have that much real estate experience and I think I'm afraid of failing which is stopping me from making decisions which is not good for an investor. So any insight you can give me would be truly appreciated. what would you do if you were me? Maybe you guys will share something that I'm not even thinking of 😁 thank you so much in advance.

2 Votes

All Forum Posts by: Account Closed

Account Closed has started 8 posts and replied 18 times.

Post: Investing in Cleveland OH experiences

Post: Advice please. Buy now or wait?

Post: Advice please. Buy now or wait?

Post: Lenders in Cleveland, OH

Post: Investing in Orlando, FL

Post: Advice please. Buy now or wait?

Post: Advice please. Buy now or wait?

Post: Advice please. Buy now or wait?

Post: Loan for second investment property

Post: Advice please. Buy now or wait?