All Forum Posts by: J. Mitchell Bernier

I actually was running a scenerio yesterday that i think many investors will start to look at. Most people will say they need to net cash flow 150-300 a month in cash flow. And with most people buying rental properties around 150k-250k that would mean you would put down roughly 30-50K in down payment to get that cash flow. 

If you put that same money into a 3 month or 1yr Treasury you get similar cash flow of 120-200 a month, risk free. 

Again, this doesn't take into account the added gain in principal paydown and appreciation, but the treasury also doesnt have vacancy risks, repair issues, slow pays, or falling market. Also the short-term treasuries are more liquid. 

So if you are looking for just straight cash flow, there are better options out there than real estate. 

@Dan Williams 

Yes, it is important to have these relationships. Two main reasons are speed and flexibility. 

If you are buying standard turnkey properties and putting down 60% and the seller is willing to wait 30 days or longer then it might not matter. However; if you are buying properties that are in disrepair and need substantial rehab and their are multiple buyers you will need a relationship with a banker who will move quickly so you can get the deal done first. Also sometimes properties take longer and cost more than expected to renovate or build, that relationship can allow you to finish on time without too many delays. 

Again, if you are buying turnkey properties with hefty down payments then maybe not so much. 

 Yeah I don't worry about those people. Those people are never going to take action no matter what happens in the market and that is neither good nor bad, it just is. 

But for all the investors who have been doing things for the last 5 years or longer, patience is a virtue in times like these. 

 Yes, I agree we all need to continue to look for opportunities. But I will keep my sports reference going and ask this question.

Is it better to never swing the bat and get 4 balls or swing and miss three times, or have a pop out in the middle of the field? 

No reason to rush anything wait for the right pitch and then swing, if you never see it, take your base.  

I think right now we should all be waiting for "our pitch." Over the last 4 years we have all been swinging for the fences, since everything was a fastball coming down the middle. Now the market is giving you a curveball, a slider, and a changeup, do you still swing? No, you wait until the fastball comes and hammer it down the line. 

I think we all get caught up with I got be doing a deal now, when the most prudent thing is to wait for the right moment and opportunity. We are really early into this cycle so need to rush anything. Especially when cash is paying so well right now to wait. 

 and there is the rub... "whenever that is" truest statement I have heard in a long time. 

Will be interested to see if this also changes the mortgage rate market forever. Mortgage rates used to be 1.70-2% over the 10yr US Treasury, and the idea was that they were assessing the risk premium to a similar duration risk free asset. Well, if the duration is longer than 10yrs will they start assessing the risk premium to a longer duration risk free asset? Say the 20yr? Or will they just keep the spread higher than normal? Right now the spread is closer to 3% over the 10yr Treasury. 

Interesting times ahead.  

 Hey Mark, 

How many companies are you seeing offer the 40yr terms (first 10 year's interest only) and are they fixed rates for the full 40? I am honestly shocked these products are out there for the single-family space. They are much more common on the large multi family loans I have seen. 

Thanks again! 

Yes, 20yr amortizations are the norm for smaller community banks and the reason being is interest rate risk. 

There are 30yr mortgage products out there, but most are going to be with the larger lenders, and they may or may not lend on your property depending on the location and value of the home. 

This scenario is a perfect example of liquidity drying up by the way. You mentioned that one bank used to do 30yr notes, but they have no liquidity so they can't. Because they have so much lent out at lower rates, and people are not paying those off quickly or selling the underlying asset tied to that note because the rate is too good. Note repayments are slowing and if that situation becomes more of a trend, watch out. 

Good Luck to you! 

@Tanner Johnson Go and talk to the local credit unions and banks in the town or the neighboring town. You might not be able to get the full amount you were wanting back in the cash out, but I am willing to bet you could get something if you own it outright.