All Forum Posts by: John Suralik

@Elad Messing Thank you. I didn't realize that not moving out of your home was a provision of some HELOCs. I'll make sure I check with the lender. 

Congratulations Mike. Interesting niche. I really think that the same opportunity to buy undervalued land would found in my home town. Thank you for sharing,

It really depends on the numbers? What is the purchase price of the condos? What would they rent for? Are there other fees, etc. 

@John Powell Thanks for the response.

I see on BP that some investors do cash out refinances on rentals, but make sure that the rental still cash flows. When using a HELOC, I guess as long as the two homes would cash flow after paying all expenses with the two homes, then it the assets would not be over leveraged. That is was my plan when buying house three in June, but I really wanted to run this by BP before pulling the trigger. I'm going to be jumping in the world of HELOC to acquire house four wish me luck!

There a few ways to lower your DTI ratio. One of the easiest ways is to make more income, but it sounds like you have full plate with grad school. Another easy way to lower your DTI is to move out of your primary and rent it out, while you rent another home. Rent that YOU pay does not count against your DTI. You could rent a pent house sweet for 10k a month and it doesn't count against your DTI. The only problem is MOST banks want at least 1 year of rental income on your taxes before they will count it and remove/counter that mortgage payment on your primary home. I did find one that will simply use a lease to count new rental properties income, but they consider me as being an experienced land lord because a have few years of rental income on my taxes. Moving out of your primary now would give you some experience renting a home as well. I would check with my accountant and get second opinions though.

On a side note, have you ran the numbers on your current residence to see if it would be a good rental? I have a lot friends who have tried to rent their primary homes out and have lost a lot of money, because the house doesn't cash flow.  Renting a home that doesn't cash flow is a good way to go broke. Run the numbers on the BP rental calculator and make sure to input realistic numbers for maintenance costs, capital expenditures, taxes, property management, insurance, and finally the mortgage. 

@Darren Budahn Thank you for the heads up. I will continue searching. I was pretty happy when I found 80% and fixed for 10 years, but more cash could always be useful. 

My main reason for posting this question was to ask for BP's experience. In 2008, I lost my nest egg in the stock market over night because of a margin call from my online stock brokerage account. I was young, naive, and didn't understand how margin worked when I accepted their offer to extend my account to margin. I puke in my mouth a little when I calculate what my shares would be worth today. I don't want to make the same mistake in real estate. I just completed renovations on my third SFH, which I plan on renting when I move out in a year, and I don't want to do anything to jeopardize the good things that are happening. I'm getting better at "finding deals" and understanding the process, but I hear of people being over leveraged. Do I need to worry about if the future rent of my primary, will cover my mortgage, HELOC, and still cash flow after cap ex, maintenance, taxes, and other expenses? OR is it enough to look at the HELOC payment as expenses of the next deal and just make sure that it cash flows with the HELOC payment. I'd love to hear from someone who has done it. I'm working on my taxes and I am going to apply for the HELOC as soon I file, so I have one more year of rental income on my other properties.

Congratulations. Smart move raising the rents up next year when the current leases expire. 

I recently completed the renovations of my primary residence. The ARV is 195K and the first mortgage is for 78k. From talking to a few lenders who do HELOCs they will lend up to 80% of the home minus the first mortgage, so I should be able to pull out 60-80k. I would like to use this buy our fourth investment property (SFH) with "Cash" from auction or a REO that of course has equity from purchase date. The new investment wouldn't have a mortgage, but I would need the monthly income to pay for the HELOC. The HELOC that I am looking at is fixed for ten years, and when I checked a month ago the rates were 4.25% (I'm guessing rates climbed a little since then.) I am wondering what are dangers? What am I missing? What experiences do you have with this?

How long would you cook on a Coleman camp stove to earn $74,000 in equity?

I found my number. It is 99 days.

Now, for a little background on the deal.

We closed on a third house, a HUD REO, on June 30, 2015. The purchase price was 90K and we were approved for a HUD FHA 203k loan.

The conservative ARV is 195k and we will have 125k in the house after all repairs. It was one of the HUD auctions that is only open to future occupants before it is open to investors. We knocked down walls and created an open floor plan, removed the popcorn ceilings, replaced dated wood paneling with sheet rock, and installed hardwood flooring throughout the home in the first 45 days of construction. My wife and I decided that we were masters of the renovation universe. Life was good.

The kitchen hit us like the morning after a good wedding party that moves downtown when the reception if over. I knew the headache was coming; I saw the mold on the wall. The corroded plumbing haunted my dreams, but we couldn’t tackle the kitchen first because renovations to the kitchen was not listed on the 403b repairs list. In order to draw from the 403b escrow account and pay the contractor for the portion of the repairs that he completed, all of the repairs on their list must be completed and NO OTHER MAJOR PROJECTS ON THE HOME CAN BE IN PROGRESS DURING INSPECTION. This rule caused us to do the renovation out of order and we moved in after the hud inspection, completed the kitchen renovation, and cooked on a camp stove for exactly 99 days. 

This home is in a very desirable neighborhood, ten minutes from the beach, has low exterior maintenance, but the best part is it will cash flow $250 a month when we move out in a year. Thank you BP for all of your experience and encouragement.