All Forum Posts by: Jonathan Escobar

@Karen Jackson with refinancing, it is very tricky. What I would do if I were you, is go to your lender. If you don't have a lender go to multiple lenders and even if you do have a lender, talk with other lenders as well and have them show you what would happen if you were to refinance versus staying on the FHA loan. They will have the most information and will have the proper tools like calculators to tell you what would be the most beneficial for your situation. The lender will be able to get all the details in numbers that he needs in order to show you what the best possible scenario would be.

But rates are low right now with high prices. If you bought your property at a high price anyway and the rate lowered then that might be a good thing to do. But if the market drops, then your property won't be worth as much and you won't be able to refinance and your chance will be gone. So take that into consideration.

@Kevin Kong that’s awesome that you already have your own business. Make sure that you have enough capital to put down a down payment for a multi family house hack. You want to check your zoning laws. I know in some areas the zoning only permits a certain amount of unrelated persons to live in one unit. With many multi family units, The rent to price ratio is too small for it to work. But if you had 3 to 4 people in one unit, it might work. So just make sure you understand the zoning laws in your city. You can do that by contacting the city and asking for the department that handles zoning laws. If there are no restricting laws, you might consider house hacking a four Plex renting out to individuals in the other three units and also the individuals in the unit you are in. This works best if you have three bedroom one bath units. you live in one bedroom, and rent out the other two bedrooms to maximize rent income.

Another thing that I see that might hinder your ability to get into the deal is your ability to qualify for a bank loan. Start by building your credit and making sure that you have over a 640 credit score for FHA 3.5% down. On a conventional loan that is 5% down, you'll have to talk with your specific bank to see what credit score they require for you to qualify for that type of loan. You might also consider talking with different lenders and seeing which lenders will do a 401(k) loan that combines and FHA loan with the cost to rehab built into the loan. let me know if you have any questions, I am in Utah, and I'm trying to do the same thing but the only thing that's stopping me is my credit score and financing the down payment.

I'm looking to get experience in managing real estate. Buy and Hold is what I want to do in the long-term. So I'm looking for work that will give me experience in that field. Property management would be really nice to get into as well as an on-site managerial position. Partnering with a landlord to help him with his units would be something that I would also like to do. 

My best friend's mom asked me about her house in Everett Washington WA. I told her that it might be a good idea to refinance her town house because she purchased it for $200k and now it is worth around $350k from market appreciation. I assumed that she might want to refinance and get her house reappraised so it is worth more. She has only remodeled the kitchen. Is it a good idea to refinance her mortgage to pull out the money from appreciation ($150k = 350k-200k) assuming that the rates are about the same?

Obviously she should talk to a lender to see what is possible but is there a way to calculate if it will be profitable for her to refinance and take out the equity? or is it best just to HELOC or get a home equity loan? I feel like that would cause her payments to go up way more than a refinance. With a Home Equity Line Of Credit, it's like a giant credit card that you have to pay back like a short-term loan. A Home Equity Loan would increase the payments that you have on the house. But wouldn't a refinance increase the value of her home and then take out the equity that she wants while still having around the same payments per month on it if she left a good chunk of the equity in the house?

I'm trying to understand how refinancing can supercharge your investing. This is a little bit different than BRRRR because she didn't buy the house with cash. Typically you buy a house with cash and then cover the holding costs until you can rent it out and refinance. How does it change if you buy a house on a long-term loan and then want to refinance after that?

Or in another situation, if you have 100 rental units that have been rented out for years, how do you know which ones you should refi to get cash out to use for more deals? Do you want to refinance when the market prices are at its peak? or does it depend on whether the numbers work for cash flow purposes?

@Curtis H.

this is a really great question and I’ve had the same question for a while now. what I have been thinking though is if you cash out refinance, you still want to make sure that you have $100 cash flow on your current property. so run the numbers if you were to take out 60% of the equity versus 50% versus 40% and see how much of the equity you can take out without having a negative cash flow. This will allow you to invest in more properties when the market downturns, or use it as a down payment for a four Plex or commercial property.

that way you still have your property in Texas, your wife will feel secure with that property, you will lose cash flow on it, but you will have capital to invest in other deals with better interest rates and probably cheaper. You won't have to pay taxes on it since it is equity and so you can hold onto it until you find the right deal. so if you have $130,000 in equity and maybe pull out 40k-100k so you still have more than 20%-40%of the LTV left into the property.

but when you get your house appraised, know that it’s harder to cash flow when you have a bigger mortgage amount.

@Parker Jackson If you have an FHA loan, yes you can refinance into a conventional loan when you have 20% equity into the home. But that will take quite a bit of time if you aren't putting in your hard earned cash into the deal to reach that 20% equity.

Keep in mind though, that you can only have one FHA loan at a time. There are some conditions where you can have two, but under very strict circumstances. For example you wouldn't be able to have two FHA loans here in Utah. But there is a possibility that you could have one here and one in the location that's over 100 miles away.

Reach out to some lenders and they can give you more information on FHA versus conventional loans.

I’m pretty much in the same situation as you guys. I’ve decided to rent very cheaply until I have the capital to go into multi family housing and house hack that.

Also what I’ve been doing right now is getting books from the library from BiggerPockets and learning as much as I can so that’s when I am ready to invest, I will be able to and be the most prepared. It’s a very good way to get information without having to pay for the books.

@Devin James definitely do everything you can to get married to the right person for you. Brandon Turner, Joshua Dorkin, And David Greene Also that is super important to have your spouse on board with your financial goals. That doesn’t mean that she has to be into real estate investing. But it is important that she supports you in your goals. And if your goals are to be financially independent and live a frugal (not cheap) life, And there will be some major consequences if she is not on board and is the opposite of frugal.

I would have a serious discussion with her about what is important to her as far as your relationship goes and what your life would be like in the future if you decide to save now and invest versus get a good job and go right into living the high life with lots of expenses etc.

Ultimately though, investing is not the purpose of life. The purpose is to Find happiness. And if you think that real estate should come before A family in the list of priorities, then I think you’ll find a false sense of happiness. I believe that the family is the most important relationship we can create in this life.

Having said that, it’s very important to have a spouse I will understand what you’re doing and not question every move you make when trying to reach financial independence for your family. But don’t let that get In the way of your goals to reach financial independence.

@Jaiden Olsen That's great advice! Thank you. So I haven't found even a close deal on the MLS. Is networking with wholesalers one of the better ways in your experience to find off-market deals? My brother is also wholesaling as a side hustle so maybe he could help me out. But I've never used a wholesaler before. What are the pro's and con's to using a wholesaler vs a real estate agent? Are all of the deals that wholesalers find off the market?

Also when I go to these REIA meetings, how should I start off networking? Getting as many people's information as possible or just have genuine conversations with a couple wholesalers and build rapport? I kind of want to have a goal in mind when I go so I'm not just a wall flower. I'm pretty outgoing but I also want to make good use of my time when I go. Thanks for the suggestions Jaiden.

@Todd Brady yeah the main thing though is that I want to be in Utah county close to BYU where I attend school. So it would be a hassle to take the train almost 3 hours there and back just to go to school. But maybe I could do online as well. I'm not sure if I would want to do that but maybe it is a consideration that I should take given that I want to do real estate as much as I can and getting a place that I could live for free might be the best option to supercharge that ability. 

So it looks like in the Provo/Orem market, it is not a good time to buy multi family properties because many people are looking for them and the price to rent ratio is very very low. The only way that I could see how house hacking working is to buy a single-family house With a basement or a mother-in-law apartment and renting out the top unit.

Does anyone have any insight on whether I should buy on the MLS, or find an off market deal? Do you think this would work? How many houses would I have to analyze to find a deal that's worth it.

If I do find the house, and the closest I can get is -$400 Cash flow, it is still worth it (Married housing goes from $700-$900 a month vs. putting a down payment 3.5% down plus $400 a month in mortgage costs and expenses)?

Typically, from what I've heard from others here in Utah county, Provo is VERY VERY strict and you don't have very much freedom. Also, it's very hard to find something that will cash flow very high. The Price-to-rent ratio around here is about 0.3%-0.6% which is not very good. That is in comparison with the 2% rule (brandon turner calls it the 2% test) (can also be called the 1% test or the 0.5% test) But the main point is that the rules of thumb don't work here in Provo unless you can hustle and find a great deal off the market to someone who is very motivated to sell and you can buy something that is very below what the market is offering. Might also be a property that will require some work to be done on it so that you can force appreciation on the property to increase its value.

In my case, it's going to be even harder because I'm trying to house hack in provo/orem area. If I were to do it, I would have to find a spankin' deal or just find a property that will cost less than renting in the Provo area. Just some thoughts for you! :)