All Forum Posts by: Jesse Chunn

@Brent Coombs

Very good point. I have not been doing that. I will from now on, especially since I have always assumed that there is a good chance that even if I pay cash I might get an equity loan later to fund more deals. I never want to be in a situation where a property is not easily paying for itself (and then some).

Thank all of you so much for the input. Even more helpful than I expected.

From the advice I have gotten here, there are a few gems in my opinion. Thanks again to the respective contributors, and keep 'em coming:

• Financing / leverage allows for faster growth.
• Financing allows for a much larger portfolio (for a given amount of cash), with lower positive cash flow per property but more positive cash flow overall.
• Having some percentage (say 50%) of properties free and clear (100% equity) can act as a backstop to protect against downturns and other bad situations.
• Rates are low right now so now is a good time to borrow as much as possible.
• Starting with cash and then quickly moving to borrowing can reduce the complexities when first starting out and building a team.
• Using financing leaves more cash on hand to deal with unexpected expenses.
• A large multi-unit benefits from economies of scale, which supports the argument to leverage existing cash to finance larger cash flow (ROI) as a percentage.
• One "con" for large multi-units is that the market for multi unit properties should I need to sell is tougher because of limited buyers.
• Gaining two or more years of proven rental revenue will be considered as good as employment income by smart lenders.

Matt,

I totally agree with you on that, however, I am scared stiff to jump into a big multi-unit because I simply don't know what I don't know. I have zero experience. I have not bought a single property (other than a few primary residences) and it seems like it would be a good idea to have at least a couple of deals under my belt before getting into something like that. Would you (or anyone) disagree and suggest that I just go for it?

@Account Closed Thanks for the reply. I don't really have a problem with getting financing. Like I said, I have good credit and income. The question is more around the pros and cons of cash vs leverage. But you do bring up a good follow up question. If I were to quit my day job, do lenders look at a rental that basically "pays for itself", or do they require other income, as if the property doesn't generate cash flow? Or does rental history (experience) make a big difference, as you suggest?

Your family is willing to help how? A larger down payment would help (private loan from family). A co-signer would certainly help (if they have good credit and are willing). Dealing with family can be dicey, but those are options.

Marcus, I am fairly new to the game, but I have bought several homes in my life, and one thing I can suggest is that you talk to more lenders. Some are more willing to be helpful and get creative than others, and don't forget the small community banks and credit unions. For some of them, it may help if you can show that the rent from the other half of the property can cover (or help cover) the mortgage payments. Hopefully others with more experience will chime in and confirm or deny my thoughts.

I have enough cash to do several all-cash deals. In my area (DFW), sub $80k single family properties are fairly plentiful. My thinking is that I could do several of these deals for cash, and if I get to a point where I run out, I can either sell (for at least a small profit) or get equity loans. Of course the assumption is that I will also have passive income from the existing properties that would cover the loan payments and provide net cash flow on top of at least $200-500 per month each. I have good credit and good income from my "day job".

Question: Is there anything wrong with that approach? What should I watch out for? What are the advantages / disadvantages to this? Is there a better way? I would really appreciate some thoughts and advice.

@Brent Harris

Thanks for that info, Brent. I am new to the game, just browsing the forums, and your reply probably just saved me some embarrassment and, more importantly, wasted time.

Jesse

Thanks @Michael Lee

Yeah, us old fogeys have to stick together :)

I will soon be looking for recommendations for all of those roles, so by all means let me know if you know some good folks down Arlington way.

I worked up in Coppell for a while in that building with the bronze mustangs in the courtyard, if you are familiar with it. I would love to get together for lunch or coffee the next time I'm up that way, or if you get down to Arlington. My email and number are in my profile, so don't hesitate to ping me.

Jesse

@Todd Dotson

Fantastic. Thanks. Shoot me an email, or call or text, and let's look for an opportunity to grab a coffee and get acquainted, my treat. I am in Arlington near 20 and Little Rd. (around the southern tip of Lake Arlington).

Jesse.