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All Forum Posts by: Javis Ray

Javis Ray has started 2 posts and replied 14 times.

Post: Is getting both licenses a "No Brainer?"

Javis RayPosted
  • Posts 14
  • Votes 2

Thanks for all the replies! 

This is totally self serving and I guess it's technically a pitch. But as James so astutely observed, I have a tough job:) I'm new at this and I'm genuinely asking for help with my pitch, not pitching you folks but it seems like there are flaws in the actual product that I'm not understanding. Thanks!

Post: Is getting both licenses a "No Brainer?"

Javis RayPosted
  • Posts 14
  • Votes 2

Thanks for your reply, Bruce! So, you're saying that agents already have enough to do with out adding the mortgage side to their plate? This is exactly the part that confuses me. Our program sets agents up with a team so they don't have to do the "extra work" of being a MLO. And any work an agent would be doing on the loan side, wouldn't the be doing anyway (i.e. communicating with buyers/sellers, chasing documents, etc?) This, with the addition of a second commission AND the potential of a passive downline, is what made me get excited about this product to begin with. 

Post: Is getting both licenses a "No Brainer?"

Javis RayPosted
  • Posts 14
  • Votes 2

Hey All!

Is it a no brainer for agents to also get an MLO? I'm biased because I work for a company that helps agents do just that, and this is not a pitch (I'll not mention my company name at all,) it's a genuine ask for help. I'm just starting out trying to get agents to use our service and don't seem to be adequately conveying the product's benefits, because as stated, to me it seems like it's a no brainer.  My company does the following:

• Free and simple MLO Licensing (22 hours online or in person and you choose your schedule)

• Mortgage team to handle the backend (meaning, no structuring, underwriting or processing loans) 

• Competitive mortgage rates backed a company with 20+ years in the business

• Downline revenue stream on the lending side (similar to EXP model.)

• They do not have to change brokerages

In my mind, there aren't many cons to this. What am I missing? Why wouldn't an agent find this compelling? I'm reaching out to agents through cold sms/calls/email. Any and all feedback would be very helpful. Thanks in advance!

~J

Originally posted by @Carlos Asuaje:

Hey Javis,

I think the first and most important thing to handle is the credit situation. If you are in a better spot now, financially, then when covid hit, this rental might be more valuable then just the $400/mo cash flow. The monthly payments on the property are helping your credit out! So it might help to think about it as a$400/mo property + a vehicle to help your credit get back to where it needs to be (which could jumpstart your investing much more then "a better property")

If you're in need of cash, then maybe sell it and take care of number 1 (yourself) first, but IMO this property sounds like a pretty great investment as is...

Thanks Carlos!

The goal is defiantly to rebuild my  credit but was hoping to not have to wait for 12 months to move forward with new investments:)

Originally posted by @Drew Sygit:

You can't include your finance payment in a CAP Rate calc!

Based upon your numbers:

Rent $950/month x 12 = $11,400

Prop Tax $100/month x 12 = $1200 (this is just an estimate as you didn't supply!)

Insurance $50 x 12 = $600 (this is just an estimate as you didn't supply!)

PM Fee $80 x 12 = $960

MNT/Vacancy 15% = $11,400 x 15% = $1,710

NOI = $11,400 - $1200 - $600 - $960 - $1,710 = $6,930

CAP = $6930 / $85k = 8.15%

FILL IN THE ACTUAL TAXES & INSURANCE NUMBERS!

Hope you learn from this that you can't just blindly estimate income & expenses and you need to REALLY understand what you are reading online.

I see that makes sense. Thanks for clarifying that and I hope it was clear that this entire post was about me wanting to learn more and being new to this. 

So, with that info, what would you do in my situation, Drew?

Originally posted by @Drew Sygit:

Would speak to another loan company. 

You Cap Rate calc doesn't appear to be correct. 

Your Annual Gross Income = $4980 => $415/month?

You're supposed to figure out your annual NET INCOME:

Gross Rents - Property Taxes - Insurance - Property Management - Estimates for Mnt & Vacancy = Net Operating Income (NOI)

NOI / Value = Cap Rate


I'll will try to reach out to a few more brokers, though from what I've read, the 12 month missed payment thing seems to be pretty standard.

Property breakdown (give or take because of random repairs, etc):

Property: We owe 65k with a $535 a month mortgage and (as discussed) an estimated 85k value "as is."

PMC: We negotiated $80 a month flat rate for management, so like 8.5% management fee

Rent: $950 a month

Operating cost: I estimated  70% overall operating cost which included the 8.5% management fee, mortgage and repairs/upkeep, etc)

Average net income would be $3216 a year Gross income would be $11400 ($950 rent X 12 months before all expenses)

So re-calculating the cap rate and using total gross income I'm getting a rate of 4% as opposed to the 4.68% I originally calculated.

Does that seem more accurate?

Originally posted by @Drew Sygit:

A. Please share your Cap Rate calc

B. If both you and wife have to wait 12 months to refi, why wouldn't you have to wait 12 months to "buy up" into an STR?

So, you sell the property now to time the market. Then you have to wait 12 months to buy any "downturn deals" due to credit issues (BTW: if there is a downturn, getting a loan gets HARDER!).

What are you going to do with your money while you have to wait the 12 months?

I'm not comfortable with posting a link to the calculator I used, but I just googled "cap rate calculator." Unless you meant you'd just like to see my calculations, in that case:

Property Value: 85k

Annual Gross Income: $4980

Operating Expense: 20%

Cap Rate: 4.687%

It seems I'm not being clear on the specifics, here.  My apologies:) We would only have to wait 12 months to refi the rental, not to buy another property.

The rental property is in my name only (my credit is bad due primarily to the missed payments on the rental property.) We COULD refi the property in my wife's name (and her good credit) but not for 12 months BECAUSE of the missed payments (My broker says that no lender would even consider a refi on the property until we have 12 months without a missed or late payment.)

If we sell the property, we would have money to invest right away into a new (better) property (using ONLY my wife's good credit.) Timing the market has more to do with pulling out the equity of the property while the value is high.

Originally posted by @Drew Sygit:

STR = Short Term Rental (you wrote, "we would like to get into a short term rental.")

Not understanding, "If we sell, we could use my wife's credit to buy a new property with the proceeds". If your lender is telling you it will take 12 months before your wife can refi, then why wouldn't it take 12 months before she could do a purchase mortgage?

Also, why are you trying to "time the market",  (the worry I have is that the longer I sit on the property, the greater the chance the market shifts and I wont be able to pull out the equity)? 

What crystal ball are you using? What happens if the market continues to increase?

We've always had the mentality that rental real estate is a long-term hold...



Ah, "Short term rental" yes, I see now. I'm still learning all the lingo:) So, the neighborhood the property is in, is not an "STR" kind of neighborhood.

The property is not eligible for a refi (Due to late/overdue payments) for at least 12 months (according to my broker.) If we sold and had the money for down payment/rehab, my wife would put it in her name.

We're trying to "time the market" because many things I've read/listened to (Including but limited to Bigger Pockets Podcasts) says we are overdue for a down-cycle in the housing market. I'd hate to leave all that potential equity sitting in the rental. No crystal ball, but we're  just working with the information we have, planning for the worst and hoping for the best:)

I too would prefer to hold the property but this is the point of the post. I wanted to rehab the property, get higher rent and do a cash out refinance but that isn't possible for at least 12 months. We could hold on to the property and just let it earn a little every month, that is until the tenant moves out and we'd have to do a rehab anyway. Or we could rehab, sell for, a what looks like, a decent profit, then have a down payment/rehab cash and try to get into a short term rental that could have a higher cash flow, and a potential BRRR into more properties.

A: Hold the property that has a 4.68% cap rate (I used to calculator fo find the cap rate) and hope the market keeps improving and nothing goes wrong.

B: Rehab and sell to get some working capital to "buy up" into a better property. Preferably a "STR" with a higher monthly cash flow and the ability to do a cash-out refi.

C: Do the rehab, get higher rent, pay off the rehab cost over the next year to end up with a property with a higher cap-rate/cashflow.

D: Some other option we hadn't thought of?

Originally posted by @Drew Sygit:

$15k in repairs to go from $80k current value to $140k ARV?

Who's running those numbers? Hopefully, you aren't "blindly" trusting the PMC. Even if they are honest people, you need to do your own validation on tose numbers!

Really don't see the point in selling, paying closing costs, then buying somehting else and paying closing costs again!

Why can you turn this property into an STR?

Why can't you add you wife to the property deed and have her refi in 6 months?

The PMC, my agent (he also did comps), and just research on similar properties (Zillow, Realtor.com) is what we're are using to get that 140k number.

I feel the same about selling but the worry I have is that the longer I sit on the property, the greater the chance the market shifts and I wont be able to pull out the equity.

Do you mean (I had to look up what a "STR" is) turn this property into a multi family?

We have missed/late payments from last year and our broker/lender told us that my wife could refi (as she has dower rights, or something like that), but we would have to wait at least 12 months to do so.

Originally posted by @Michele Fischer:

You will get a lot of different opinions, there are a lot of different paths you can take.  Personally, I would gradually raise rent and try to keep it closer to but still under market rent.  Each year we raise rent to the midpoint between current and market rent.  I would not refinance properties, I would look for other sources of funding such as savings, other people's money, study Brandon Turner.  And, of course, rebuild your credit.  Maybe the next rental purchased is in your wife's name.  Maybe you'll need to move a little slower.

Thanks for the reply Michele!

Yes, it's looking more and more like we will need to sit on this property and find other ways to creatively finance our next property.