All Forum Posts by: Jacqueline Wright

Hi India,

Congratulations on taking the leap into real estate investing! 

Auction Property Considerations
Research the Property:
Ensure you’ve done due diligence (e.g., title search, property condition, and liens). Auction properties are often sold "as-is."

Understand Auction Rules:
Auctions typically require fast closings, often within 7-14 days, so confirm your financing aligns with this timeline.

Invest in Fix-and-Flip Properties:

Use the $50K as a down payment or cover acquisition costs for a non-recourse loan (required for SDIRAs). Any profits from the flip return to the SDIRA tax-free or tax-deferred.

Hi Brad,

Yes, you can potentially use your Traditional IRA funds as part of a down payment for an investment property, but there are specific rules and considerations to avoid penalties.

Loan from a Solo 401(k):

If you have a Solo 401(k) instead of an IRA, you could borrow up to 50% of the account balance (up to $50,000).
These funds can be used for a down payment, including on investment properties.

Hi Otis,

Self-Directed IRAs (SDIRAs) can be a great tool for funding real estate deals, especially for private money deals. One of the pro's is Investors can tap into retirement funds to finance deals without depleting cash reserves.

Hi Daniel,

Refinancing out of a high-interest bridge loan can be challenging, but you have a few potential options based on your equity, tenant situation, and FICO score. If your current lender is open to restructuring, you could negotiate better terms (lower rate or extended term). This would buy time to improve cash flow or explore better refinancing options.

Ask Your Lender: Would they consider lowering the rate temporarily or extending the loan period while you stabilize cash flow?

Explore a DSCR Loan with Reduced Down Payment

Some lenders offer DSCR loans with minimal cash-to-close requirements if your property cash flows (even marginally). With your $1,100 rent and the potential for an improved loan structure, it's worth reaching out to DSCR lenders who are flexible on reserves and leverage.

Key Points:

Highlight your strong FICO score and existing equity.

If your DSCR ratio falls short, some lenders allow exceptions for high-FICO borrowers.

Scott, this is a great question and one that comes up often in the real estate world. Here are some reasons why some wholesalers might choose not to get licensed:

1. Avoiding Licensing Requirements and Oversight

• Being licensed often means adhering to strict state regulations, such as disclosures, fiduciary duties, and mandatory continuing education. Some wholesalers may see this as a hurdle or prefer to avoid the oversight from real estate boards.

2. Minimizing Costs

• Holding a real estate license comes with ongoing costs, such as licensing fees, MLS access, and association memberships. For new or small-scale wholesalers, these costs may feel unnecessary if they're primarily focused on off-market deals.

3. Staying Flexible in Negotiations

• As agents, licensees are bound by ethical and legal rules that may limit how they negotiate or market deals. Wholesalers without a license might feel they have more freedom to structure creative deals or avoid additional disclosures.

4. Perception of Liability

• Licensed agents are held to higher standards and may face legal consequences if they don’t meet fiduciary duties. Wholesalers might avoid licensing to reduce perceived risk, though this is a double-edged sword since wholesaling has its own legal pitfalls.

5. Focus on Investor Relationships

• Many wholesalers work exclusively with investors, bypassing the need to act as traditional agents. They focus on finding deeply discounted deals and assigning contracts, which they feel doesn’t require a license in some states.

6. Lack of Awareness

• Some wholesalers are simply unaware of the advantages a license could bring to their business. They may have been introduced to wholesaling as a low-barrier entry into real estate and never considered licensing as a viable option.

Why Getting Licensed Could Be Beneficial:

• Access to MLS: Licensed agents can access MLS listings, making it easier to find deals and run comps.
• Credibility: Being licensed can increase trust and credibility with sellers and buyers.
• Expanded Opportunities: As you mentioned, having a license opens up the option to list properties traditionally when wholesaling isn’t the best fit.
• Legal Clarity: Licensing helps clarify what you can and can’t do, reducing the risk of running into legal issues that plague unlicensed wholesalers.

It’s a balancing act, but for many serious operators, getting licensed seems like a logical step to expand opportunities and ensure compliance. The hesitation often comes down to cost, perceived limitations, and lack of education about the benefits.

Hi Colleen,

You may be able to refinance your DSCR loan using the property's increased value after the rehab. If the ARV has risen to $260k and you're renting it out for $2900/month, you can likely qualify for a higher loan amount.

Here are some key points to consider:

1. Loan-to-Value (LTV): A typical DSCR refinance will allow you to borrow up to 75-80% of the property's ARV, so for a $260k property, you might qualify for a loan of $195k to $208k, which could help pull out most or all of your original investment.
2. Debt Service Coverage Ratio (DSCR): Since you're renting for $2900/month, the loan payment will need to be covered comfortably by that rent. Lenders typically look for a DSCR of at least 1.25, meaning your monthly rent should cover the loan payment plus 25% more.
3. Seasoning: Some lenders may require a waiting period of 6 months or more before refinancing, so check with your lender to see if this is an issue.

If the numbers align, refinancing could allow you to recoup your $136k investment without selling. It’s worth reaching out to your lender to discuss the specifics and get a quote based on your improved property value.

Hi Donald,

This is an interesting situation! Here are a couple of ways you could structure the deal:

1. Lease Option with Seller Financing: You could lease the property with an option to buy later, allowing you to rehab it while giving the sellers time to find a 1031 replacement property.
2. Seller Financing with Deferred Payment: Structure the seller financing with no immediate payments, allowing you to refinance once the property is appraised, and the sellers can complete the 1031 exchange when ready.
3. Escrow Holdback: Transfer the deed into an escrow account, giving you control without immediate transfer, so the sellers can take their time with the 1031.
4. Third-Party Facilitation: Use a qualified intermediary to hold funds and facilitate the 1031 exchange while you refinance.

These options allow flexibility for both you and the sellers. Let me know what you think!

PML's don't usually ask for an upfront fee.