All Forum Posts by: James Ehrig

A HELOC is a Home Equity Line Of Credit. It is a line of credit secured by your home. It is a Second Mortgage. If you default on the second mortgage or line of credit the lender would then have the ability and right to foreclose on your home, however, they would have to pay off the first mortgage. You can typically get a HELOC from the same lender that is carrying your mortgage or any other lender. I took out a HELOC to buy an investment property. You can buy a Buy and Hold investment property, fix it up and refinance the investment property into a conventional mortgage and pay back the HELOC. Then, repeat. Or you can buy a Fix n Flip investment property then pay back the HELOC after you sell. Then, repeat. Typically a HELOC has a draw period of 10 years at interest only payments, keeping the monthly payment low then any remaining balance after the 10 years will be amitorized over 20 years. Meaning you can use and pay back the HELCO just like a large credit card for the first 10 years. The HELOC will come with checks and a debit card. Can also just take cash out. If you do a cash out refi then your own mortgage monthly payment will increase and could increase substantially for the length of the loan (typically 30 years) and the only way to reduce the monthly payment is to refi again after debt pay down or refi with a large down payment. A HELOC can be a very easy and powerful tool to invest in real estate as long as you are smart about it or you will loose your home and mess up your credit. Simply be sure you have a few exit strategies and run some worst case scenarios to mitigate your risk. Hope you find this informative and helpful.

@johnathan J. Miller

What type of unsecured lines of credit did you have in mind?  

I closed on a property May 19th and was married on June 19th.  No need to wait.  If you plan on buying multiple homes, as @Simon Shih and @Jesse Hinaman mentioned, make sure if only one of you can qualify for the home, then buy it separate in order to maximize the number of loans you can each have in your name.  It will also be easier to qualify later because it will not show up on the others credit report. 

Hey @David

First, Thank you for your service.

It will be tough to invest while you are out of the state or out of the country. Using a Turn-Key provider is not a terrible option. Thousands of "investors" us them every year. First you will need to pick a market. A couple of factors to consider are: Do you know anyone in that market. Research markets first in which you have someone close by. Research may include: Economic sustainability, economic and employment diversity, job and population growth, local schools, cash flow vs property class, median home price, renter to owner ratios, ect. If that market seems like a good investing market then go for it. If not, then choose a new market and try to develop contacts on BP. Develop a good relationship with a good property manager. That will be a little tougher but they will more then likely be your main point of contact when employing the buy and hold strategy. I own a few local rentals but the ROI is not what one can easily find in other markets. I have to work a lot harder in my local area to receive a decent ROI. I previously bought an out of state property from a turn key provider back in May 2015 and thus far we have not had any abnormal hiccups in owning that property. This a test subject to see if out of state investing is an approach I would like to continue. Thus far, it has been a great experience. Even though I may be too soon to make a complete accurate judgement on if it is worth it, thus far I am convinced I will continue. If you can not pay with all cash, then you will more then likely have to do a conventional loan with 20% down and cover closing cost when utilizing a turn key provider. With 30K, that will be a one and done strategy until you acquire more capital for another down payment. Once you settle back into the states your VA loan will be an amazing strategy to take full advantage of. You earned it. Buy a multi family (2-4 units) with your VA loan. 0% down, low interest and 0% in PMI. Rent out the other units, then after a year you can refi in to a conventional loan and use your VA again, and again, and again. Hire a property manager from the start, even if you live in the unit,. that way if you move in 2-3 years a tested property manager is already in place. Hope you this helps.

Hi all,

I have a possible seller finance option on a duplex. The rents are $750 per side. Both sides have been rented by the same tenants for 13 plus years. Market value rent is around $900. Property tax is around $175 a month. Owners utilities are around $185. Owner owns the property out right. If i put together a 2 to 3 option letter of intent. What should they be valued at? This property I would be looking to acquire for my own portfolio and only for cash low. My minimum deal standards are a NET NET cash flow of $350. Any words of advice will be greatly appreciated.

Thanks

Thank you for your response @Account Closed

After reading my previous post, I realize that it does sound a little blunt. That was not my intention.

But the word "commission" is irrelevant in this matter. It is simply a word that was meant to describe " money, pay, cash, payment." The word commission simply describes benefiting or earning money, cash, payment or royalties from the completion of a sale.

Hi all,

I have read many forums and talked with other investors along with interviewed a few title companies about this subject and everyone has a different answer.

For some reason everyone one has a slightly different vocabulary for certain processes in wholesaling. For instance: double escrow, simultaneous close, double close, ect. Due to the above mentioned, it makes it extremely challenging to communicate with investors, title companies and even here on the forums.

The process in which I am specifically referring to is this:

I want to wholesale a deal, but I do not want my commission on neither the buy side transaction (A to B), nor the sell side transaction (B to C) to be disclosed. Through past experiences, in other aspects of my life, I have noticed that individuals can be extremely happy with a deal but they often have a change of heart when they discover how much commission I make off the deal.

I have a few questions with the process:

Is there a simply way to do this in California, and is it legal? (without a transactional lender to front the money for three days and possibly leave me out to dry if my buyer on my B to C transaction backs out.)

What is the exact term that would encompass this transaction?

How do I carefully explain to a title company what is taking place and what is the best and proper verbiage to use with the title company in-order for them to Not tell me that this type of transaction is illegal?

I know in other states there are closing attorneys and things that make this process easier but in California I am having a hard time.

I appreciate and welcome all responses.

Thanks

James

Hi @Danny Daniel

I agree with @Bill Jacobsen you should incorporate a 10% management fee even if you manage the property yourself.

As far as purchasing the duplex and running the numbers it simply depends on your minimum deal standards. Most individuals deal standards are different and will vary in someway. Be sure to have a clear minimum deal standard in order to help you with your decision, it will aid in pulling the trigger when you find a deal.

The typical and safe vacancy rate for a well maintained property in a decent location that is priced correctly is about one month per unit per year 8.33%. The vacancy rate in your initial assessment doubles this figure, its at about 16.5%. Which is fine if you want to be extra extra safe.

My assessment is as follows, assuming you paid the rehab and down payment with your own cash.

$2,100 - Total rent

-$708.60 - Principle and interest. (132,000 @5% for 30 years)

$165,000 - Duplex cost

-$33,000 - Down payment

$132,000 - Loan amount

-$275.00 - Taxes and Insurance (Estimated: dependent upon tax assessment)

-$175.00 - 8.33% vacancy rate (one month per unit per year vacant)

-$210.00 - 10% Maintenance reserve

-$210.00 - 10% Management fee (even if managing yourself)

-$100.00 - Utilities ( look up all utilities, especially ones that can lien your property)

-$80.00 - Lawn care or any other service

Equals $341.40 per month of cash flow. ( depending if you finance the repairs or down payment)

$341.40 X 12-months (With management fee)

NOI: $4,096.80 (With management fee)

$551.40 X 12-months

NOI: $6,616.80 (Without management fee)

If you paid the down payment and all the repairs with your own cash you would pay $53,000.

ROI: 7.7% with management fee

ROI: 12.5% with out management fee.

I hope you find value in this assessment.

I have been to both the SacREIA and the Capital City Wealth Builders both are great. SacREIA meets every second thursday of the month. Which is tonight. I will be there. CCWB meets every third Wednesday of the month at the Double Tree hotel in Arden.

Thanks for the words. @Joe Stafford, @Brian L., @Bryan L.

I have heard of investors using letters in a series. I was wondering if anyone has had any real success with these. Right now, I only have one letter I write. Which says,

Dear Joe,

Hi !

My names is james ehrig and I would like to

$$BUY$$

Your house at

123 main st

Somewhere CA, 95689

Please call me

......................

Should I keep going with this simplistic type of letter? Or

Should I send a more captivating series of letters that are more structured in nature, letters that hit to the heart of what their issue might be?

For example: If an investor is mailing to a probate. They will have a letter for their first initial contact with that person, a separate letter for their second contact, another letter for their third contact, and so on. Each letter building on the last. These letters are designed to hit to the heart of the trials and tribulations that an individual might face while marching through the probate process. All of these letters might be similar to each other but are slightly different.

Which is better? Also, does anyone know of where I can get list of these structured letters for probate, absentee, distressed property, preforeclosure?

I have been hand writing yellow letters for the past month, targeting foreclosures, probates, and absentee owners. I have been reading forum posts about there strategy, whether it is better to send one letter to many different leads or to send the same lead multiple letters on your set budget. The majority have said that it is better to target the same lead multiple times with a series of letters. The letter is depending on the type of lead (foreclosure, distressed house, probate, ect.).

My question is where can I find the letter campaigns? Where did everyone get there multiple letters campaign?

Did everyone create there own? Did they pay for them?

I fear that this type of question is one of those trade secrets that people might not be willing to share, like a competitive advantage.

I look forward to your response.

Thanks