All Forum Posts by: Jean Santiago

Correct, the bank will appraise the property then tell you you have $X line of credit. Only when you use that money will you start paying interest.  

@Jean Santiago Jacksonville is a great place to invest! You know it's good when you are in a similar situation to David Greene. He also lives in Cali, but has multiple rentals in the area. 

Would love to speak further about the neighborhoods. I work with a few partners in the area, and we come across deals that we assign to other investors when it's not our specific criteria, but we know it's still a good deal for other investors who have different goals than ourselves. Shoot me a message and we can set up a time to talk more and get deals in front of you, to at least start seeing what's available. If nothing else, it'll help hone you in on neighborhoods and figure out exactly where you want to be. 

@Jean Santiago

Hi Jean, We appreciate you and all the nurses!

Your parents may be my neighbors. Let me know if you need me to check on them or any of their friends. I have extra TP :)

Good luck & Welcome to BP!

Jean, I went thru all of this, done refi's and gotten Helocs.

I started investing in the early 80's, bought 3 properties, 2 triplexes and a SFR. They all tripled in value by 1986 when the market started to crash. Mortgage interest went as high as 18% though I got mine around 13%. As the market crashed, rates came down, and by 1990, was down to 10%. I wondered whether I should refi to take advantage of the lower rates, refi out for cash, or wait a while to see what happened and get a HELOC.

So in 1990, I got the HELOC, whose rates would vary based on market rates. If I refi'ed to a fixed rate at 10% in 1990, I would be stuck with it if the rates dropped, and do it again. In fact, rates did drop from 1990 to 1993, where it was around 7.5% (from10% in 1990) when I finally refi'd, so I felt I did the right thing. I could have refi'ed again in 3 years, but the closing costs would have eaten up the savings from the lower rates, paying $7K to $10K per property in points and fees. The 1993 refi's increased my cash flow by $15K to $20K/year, with lowering of the rates by 6% for $300K in mortgages.

Now, I still got my HELOC from 1990 which I didn't put to use. Had I done a refi out in 1990 or 1993, I would have had to go invest the funds into interest bearing investments, as my dad did running around that time, investing and cashing out. I know, he doesn't drive and I have to chauffer him around. On some of these, you have to pay a penalty to cash out.

I used the HELOC to acquire properties at foreclosure auctions in 1992 - 1993. One problem I encountered using HELOC's is if the lender requires down payment in seasoned cash, not a check from the HELOC account, in my case, 6 months seasoning. They ask where the downs payment funds are from. Fortunately, my wife handles her mom's finances, had an account with her over $100K in value, for over 10 years, and they OK'ed it based on that. One nice thing at these foreclosure auctions is the foreclosure bank provides the mortgage, one I got at 10% down, but required seasoned cash. then they're also portfolio loans where the normal income, DTI requirements, owner occupancy rules are waived as the loans are not sold.

One co-worker of mine was going to acquire properties using HELOC's at the time planned on working around the seasoning requirement having another co-worker add his name to an account, and paid the co-worker a few dollars a year for the privilege. It's just for show only if anyone asks You can take a few dollars out of the HELOC and bank it. Turns out I used the HELOC to pay the remainder of the down payment anyway. as I used it to purchase a bank check, and no one at the closing verifies where the money came from.

Investment Info:

Small multi-family (2-4 units) buy & hold investment in East Greenville.

Purchase price: $165,000
Cash invested: $20,000

Duplex. Unit A is a 1 bedroom 1 bath with 1,000 sq. ft. Unit B is a 2 bedroom 1 bath with 1,100 sq. ft.

What made you interested in investing in this type of deal?

I knew I wanted to invest in a small multi-family property, knowing that if one of my units was vacant, the other unit would cover the mortgage of the property! Low risk, great cash flow.

How did you find this deal and how did you negotiate it?

I found this deal on the MLS. It had been sitting for 100+ days and had significant price reductions over the length of the listing.

How did you finance this deal?

I work for a real estate firm that has multiple branches and one of the branches is hard money. I was able to utilize them for my financing. We also used a personal friend who loaned us $25,000 with a 10% return on his money within 12 months. Our goal is to refinance the deal in 3-6 months.

How did you add value to the deal?

I completely renovated the 2 bedroom unit, putting about $7,500 in.

What was the outcome?

The first floor unit was previously rented for $825 per month. The tenant left when we purchased the property and it's now being rented for $900.
The 2nd floor unit will be rented for $1,125 per month

Lessons learned? Challenges?

We did the renovations ourselves and it's taken us longer than we wanted. We are still on our schedule but it's been a lot of long nights and weekends. Our next property we will hire out the work so it can get done in a more timely manner.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I partnered with a contractor friend of mine who really knows the ins and outs of fixing and upgrading. He's been an absolute huge help.

Welcome to Florida investing, @Jean Santiago. Im in Miami, but I invest in central Florida. I'll be watching this thread to see what you come up with in the Jacksonville area.  

Hey @Jean Santiago,

I have been to Jacksonville several times but I have yet to narrow down any specific neighborhoods. My parents live in Ponte Vedra Beach which is a bit out of my current price range. Have you been able to narrow the search down at all?

To answer your question, I have had the Chicago place for about a year and a half at this point. It was a great place in a popular neighborhood and then I had to move back to California so I just kept it there and I am currently renting out here. 

An ADU is accessory dwelling unit, think a granny flat, in-law suite, guest house, etc. I had always wanted a small multifamily but there weren't many in my price range when I was looking in LA in 2009. So I came out here since my sister was in Diamond Bar. I was still looking for a a possible multi to househack (didn't know that term back them) but CH isn't really zoned for what I had in mind. But I lucked into this home with a permitted garage apartment conversion (separate entry, only shared space is the laundry room). So I rented that out for most of the last 10 years. I lucked into two great tennants too, but next time I will try to use a property management company to run the various checks. There are some legal considerations if you're a homeowner trying to run credit checks on roommates or tenants. Maybe that's an easier obstacle to navigate now than it was 10 years ago when I was looking into it.
The tax benefits including writing off half of all utilities, maintenance like gardener, plumbing services, HVAC servicing, anything that affects the rental side I can write off. When it's empty, that's like a business loss. 
If and when this pandemic simmers down and I feel comfortable attending cons, I *think* I can write off the BP conference. I'll have to check with my tax advisor but I believe that is the case. I'm sure there are a lot of other strategies I'm not remembering or aware of but my tax advisor always reminds me that if I didn't have the rental I would have a much higher tax burden. 

Overall I recommend it to people. It's *almost* free money.

Basically with the HELOC you are borrowing money from yourself and paying interest on how much you are using. I would only use it to pay for something that I know I will get the money back from. So when we use it. We can purchase any property instantly with "cash" from our HELOC and remodel it as needed. Then we go to the bank and ask them to put a mortgage on the house now that it is fixed up (sometimes the properties we buy wouldn't be initially approved for a mortgage until fixed up) Then when your house appraised they will give you back 80% of the amount the house then appraised for. So you could end up with more but I like to have as low of a loan as possible. Different people have different strategies.

I would only use the HELOC for 20% down if I knew the rent would end up paying that off quickly and had it factored in along with my mortgage. I don't like that idea as much unless you had a plan to get the money back in your equity quick.

Think about a HELOC as a credit card - you only make payments when you buy stuff with it.

A cash out refinance will provide you all the funds at closing but you'll start paying on the entire loan immediately.