All Forum Posts by: James Whitehead

This is potentially going to be my first deal so I apologies in advance if my info and idea isn't as succinct as it could be.

My wife's family is in Louisiana and looking to sell 6 rental homes as they are moving out of town and do not want to keep them as they were self managing. They want to sell all of them at once, and not piece meal them out individually, so they are asking for less than market value.

The offer is 6 homes 5 of which currently have renters, for $400,000.
I have been able to talk to a mortgage broker and have been approved for a loan as long as the appraisals accurately reflect the valuation. The lender also ran the numbers to see if I would qualify and the numbers below reflect info given by me to him and his calculations. I am unsure if they are a good investment, but I am leaning towards yes, I don't have anyone around me to ask so I decided to come here.

House 1. rents for $825/m the loan will cost me $13,000 as a down payment and $6,000 closing costs, and should cash flow approx $275/m after mortgage payment are made.

House 2. rents for $600/m the loan will cost me $13,000 as a down payment and $6,000 closing costs, and should cash flow approx $50/m after
mortgage payment are made. The man currently living there is a retired wheelchair bound vet who always pays on time and so they have never felt right raising the rent as hes only living on his Army paycheck.

House 3. rents for $800/m the loan will cost me $14,000 as a down payment and $6,000 closing costs, and should cash flow approx $225/m after
mortgage payment are made.

House 4. can rent for $825/m the loan will cost me $13,000 as a down payment and $6,000 closing costs, and should cash flow approx $275~/m after mortgage payment are made. This house currently has no renter though they are actively looking to put one in the home.

House 5. rents for $725/m the loan will cost me $13,000 as a down payment and $6,000 closing costs, and should cash flow approx $275/m after
mortgage payment are made.

House 6. rents for $725/m the loan will cost me $14,000 as a down payment and $6,000 closing costs, and should cash flow approx $250/m after
mortgage payment are made.

To be able to make this down payment I have the option to:

HELOC my current home which cost me about $850/m in repayments

OR

I can find a hard money lender who would be interested in working with me, I am currently putting together a hard money lender proposal to show a couple family members that would basically look like this: No repayment in the first 12 months, all income going into an account to allow for repairs and emergencies, after that taking the cash flow and splitting it 75/25 to the lender paying it off in approximately 13 years, sooner if we can make extra payments on it and giving the lender an 8% return on his money(about .5% less than what I was quoted for my HELOC).

OR

I can potentially do a deal with my brother who is also looking to get into real estate and we split the properties 3 a piece.

These properties are right outside of a military base in a low income city but have done well for the family currently owning them with consistent long term renters in them.

I am looking for any advice as to whether or not this is a deal worth pursuing. For anyone who took the time to read this and can share any advice, warnings or encouragement, thank you.

J Whitehead

1 Vote

I am looking at a potential rehab near where I live, this property hasn't been lived in in quite some time, for the last 5 years that I've driven past it its been abandoned as best I can tell. I was thinking of trying to find the owners and see if I could take it off their hands, my main question is, as its been abandoned, what is the best way to go about seeing what needs to be done to the house? I am assuming worst case scenario it needs to be stripped to the studs and rebuilt from there, with the construction market the way it is right now is there any price point on the property that would make that a win(other than darn near free). This would be my first deal but its also off market which seems like it would at least be good practice for me to pursue and crunch the numbers and see if I could make a profit off of it as a LTR.

0 Votes

Quote from @Gerald Pitts:

Quote from @James Whitehead:

Quote from @Kevin Romines:

Real estate that is held long term builds the best and biggest wealth. That said, you have equity and some cash to leverage into something more. The question is, what is the something more that fits your lifestyle? A HELOC is a great tool to use especially if you have a low existing 1st mortgage on the property. Don't give up that low rate just to get the cash out when you can do a HELOC instead. Can you make your existing home a rental and cash flow, it sounds like you can. If you do, you will then be on the hunt for your next owner occupied home. You can put a smaller down payment on that home and still have cash to buy a 2nd rental.

Bottom line, the more cash flowing properties you have the better your monthly cash flow and the more long term wealth you will build. So if it were me, I would be looking to obtain as many properties as you can while maintaining a certain amount of reserves to cover repairs and maintenance. Then let that cash flow build into your next purchases.

I hope this helps?

This definitely helps! And this is where I am trying to figure out the next best step for us, also why Im trying to find the right questions to ask loan officers, if I have multiple properties, when do I get to leverage those against more property? is it based on the equity? Whats the best debt to income ratio that a bank wont look at me and laugh when I ask to purchase another home loan from them. I plan on diversifying between STR and LTR but I would like to do STR first, mainly because while there is more work, there is more cash flow which will help me in the beginning get set up to expand sooner. But if I won't be able to get a bank to cooperate with me having those 3 properties then I want to see about getting the STR first and then letting that income build up while the market does its thing and I set up for the next piece of real estate.

As I had it in my mind(not sure how realistic it is),is to buy an owner occupied home, and rent out the one we currently live in, and then take the HELOC/Cash out, and put that against a 10% vacation home that we will self manage to primarily offset the cost of the STR mortgage at a minimum, and to ideally have its income cover the mortgage of the home we will live in. As i have been learning and reading and absorbing the fantastic information that Bigger Pockets and their investors have put out, I want to have my properties cover themselves and even if im unable to make immense profits off of them due to the current world events, I will still be succeeding in the long run with the equity earned over time as they pay themselves off and of course appreciation as well.

Here's exactly what I did:

2008: Bought a primary home for 110k in Nashville.

2015: Took out HE Loan on property and pulled out 65k. I didn't understand HELOCS enough, and feared the variable rate.

2016:Took out HE Loan on first home and pulled out 25k for rental property down pymnt.
Bought a tiny 740 sf half of a duplex in Nashville for 86k, and rented it out. Cashflowed $150 / a month.

2020: Took out HELOC Loan on 2nd property and pulled out 65k.
Bought 2 cabins in Smoky Mountains for around 250k each. Cashflowed $2000 / a month each on avg conservatively.

2021: Cashout refi'd the 2 cabins and bought a 3 BR cabin twice the size that Cashflowed $3500 a month.

Most important thing is all the deals are cashflowing. My DTI is currently trash lol, but I con't care. I will use a commercial loan /DSCR / whatever will get the deal done. At some point, the money the properties are making will be enough on my taxes to be bankable for a regular lower interest loan again. When I stress DTI, High interest rates, etc...Cashflow is the bottom line for me. Right now, it's maybe less cashflow than it will be in a few years because of the rates I'm charged, but I'm positively cashflowing a number that is comfortable to me.

You mainly want to run your numbers side by side on what your total outgoing $ is going to be with HELOCS or Cashout refis, etc, and make sure you are still in a better scenario than if you didn't do the HELOC / REFI.

Good luck and welcome.

Gerald thanks for all those details! I do have a question, how does a HELOC repayment work that you are able to pull out a HELOC each year like that? Would that not eat up all your cash flow repaying? What does the HELOC that the refi doesn't? other than the obvious, that it doesn't make you lose your starting percentage rate?

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Quote from @Kevin Romines:

I hope this helps?

0 Votes

Quote from @Nick Shri:

Quote from @James Whitehead:

Im ready to make the plunge!

First post, apologies if I ramble...

Just came home after a year in the middle east trying to get a head a bit, after tax season we have a decent little egg in the bank, in addition to that the home we live in has a bit over 100k in equity we can take advantage of.

So my question is really this, should I purchase a second home and rent out the one we own so that I can do a cash out refinance? our mortgage is 1k and rent in our area is avg, 1600 a month. We have been researching and heavily interested in purchasing a STR in the Smokies. Or should I consider a HELOC on the equity we have and not purchase a 2nd home.

Another question I have as I am about to go start talking to banks and loan officers and see who is interested in my business, what questions should I ask loan officers with these goals in mind?

I have been researching, listening to hours and hours of the podcast, as well as reading books from bigger pockets, im hoping that through the forums I can meet other like minded people and maybe even find a mentor that understands my goals.

For everyone that takes the time to read this thank you and I look forward to hearing your responses!

You don't need to purchase 2nd home to cash-out refi, you can do it while you are living in the current home. You plan to take the cash and buy a STR in the Smokies? I am not an Oracle who could see/predict future, but just keep in mind, economy is slowing, news of less vacay spending is all day everyday (you can discount it as noise as well or take it FWIW). Now, if you really decide to go ahead and buy a vacay STR, my recommendation is to Cash-out refi your primary. You will have fixed interest rate. With Heloc you end up with variable (sure you will have more cash to play with for first 10 years but that also comes with the variable interest risk). I see CO refi little less risky.

Definitely search what questions to ask banks or loan officers here in the forum, there even podcasts on those questions > its discussed plenty of times. Connect with lenders who lend for STRs in the smokies specifically. Good luck...

If I cash out refi while living in this home will I see less available funds accessible? Again, im a newbie, but as i understood the BRRR, you can access 70% to 80% of equity(depending on the bank) with a renter living in a property, does it look different if I am the one living in the home?

I am definitely watching the news and all of the concern with things going on right now, but I also dont want to not make any moves as I think with the right deal there is still success to be had, maybe not at crazy numbers but still at good growth that makes it a win in the long game(which is where im trying to make sure im playing). I am hoping to cash out refi, and not HELOC i just wanted to see what other people with more experience and knowledge than me have to say about them both.

I will go back to the podcast for more about lender and bank questions, I want to start interviewing banks soon and get the foot work started so that at least im making consistent steps toward making progress, and not just always only talking about action.

Thanks for the advice and I'm sure I'll be back here with more questions soon!

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Nashville, Tennessee

Quote from @Paul Riley:

Hi @James Whitehead

Congrats on your success so far!

I think it all comes down to where you see your portfolio in the future and how much time/effort have to dedicate to your deals.

If you're ready to dive in, why utilize the funds you have in your bank as well as the HELOC? Of course, the terms of the HELOC will determine what types of deals you can do with it.

If you want something more passive, then I say look into JVing with someone in RE with experience or privately lend on their deals.

I like performing real estate notes because you get the cashflow without the headaches of repairs or property management.

Let me know if there's anything I can do to help!

the reason for a HELOC or Refinance is that should give me what I need to get 10% down on any property that I find that works out when I run the numbers.

I am looking to do the leg work myself, i know that there are plenty of headaches with repairs and property management, I want to leverage my time and energy as much as what I have in the bank, I want to use an STR to springboard myself into more properties faster.

With all thats going on atm I am also trying to make sure that im being smart. If i start asking questions and it seems that I should watch the market a bit more I will, i just dont want to end up in a position where I manage to get less for my money.

0 Votes

Nashville, Tennessee

Apologies if cross posting isn't allowed, I looked around and didn't see any rules against it.

Im ready to make the plunge!

First post, apologies if I ramble...

Another question I have as I am about to go start talking to banks and loan officers and see who is interested in my business, what questions should I ask loan officers with these goals in mind?

For everyone that takes the time to read this thank you and I look forward to hearing your responses!

0 Votes

Im ready to make the plunge!

First post, apologies if I ramble...

Another question I have as I am about to go start talking to banks and loan officers and see who is interested in my business, what questions should I ask loan officers with these goals in mind?

For everyone that takes the time to read this thank you and I look forward to hearing your responses!

1 Vote

Nashville, Tennessee

All Forum Posts by: James Whitehead

James Whitehead has started 4 posts and replied 8 times.

Post: Portfolio of six homes, worth the investment?

Post: Questions about rehabbing

Post: Ready to invest, whats the best way to capitalize on my situation

Post: Ready to invest, whats the best way to capitalize on my situation

Post: Ready to invest, whats the best way to capitalize on my situation

Post: Ready to invest, whats the best way to capitalize on my situation

Post: Ready to invest, whats the best way to capitalize on my situation

Post: Ready to invest, whats the best way to capitalize on my situation