All Forum Posts by: Joseph Firmin

Thank you for the insight @Michael Plaks!

You bet, glad I could help!  

Practice @Ryan Stumbo. If I was to give you homework from our interactions on this thread it would be to go analyze 100 houses using the BP calculator for your target market. Once you get to know the value of homes in your target market you will know the answer to your question above. Values of SFH are based on comparable sales of other SFH in the immediate area - that's how appraisers value your home. When making an investment, you need to have a very good idea of a range of values for say a 3BR/2BA home in your target market. Knowing that, you can make offers 20-30% below the market value (not list price) for the house you are targeting. The way to get good at understanding VALUE in your market is practice... go run the deals.

Couple things, make sure you really understand the difference between 1st and 2nd lien position HELOCS. Using a 1st lien position HELOC, this is a cash flow strategy.

You do not have to get the HELOC with the same lender you have your primary residence with - always shop for the product and lender that best suits your need.

Make sure you understand LTV. The lender will only lend you 70-80% of the value of the home. This is why you want to buy at a discount.

Regarding the second question - this all depends on your goals and strategy. You can pay it down as slow or fast as you want using the rents of the property.

Ryan, make sure you understand the difference between a 2nd lien position HELOC and a 1st (that you would use as a checking account - more of a cash flow strategy). Also, ensure you understand the LTV of the property you're purchasing. The lender will only lend you (usually) 70-80% of the value of the property. This is why you want to be able to buy it at a discount so you are not out of pocket any cash at the end. No need to get the mortgage or 1st lien position HELOC with the same bank you have your primary residence HELOC with. Always shop for the best deal and what works.

Regarding you second question, this all depends on your strategy. You get the property on the mortgage, then you pay it down as slow or fast as you want, using the rents from the property.

@Ryan Stumbo, No need to tie up your equity long term. The idea is to use it to purchase and then immediately (literally the day after you close) go get a mortgage on the property, what many refer to as a "rate and term refinance." The process is also referred to as delayed finance. You essentially buy the property with cash to lock it up (preferably at a 25-30% discount), then you go to a lender and put a mortgage or 1st lien position HELOC on the property and the lender cuts you a check for the amount you paid for the house. You take that check and pay down the HELOC you took it out of in the first place, that way, the equity is still available for use going forward.

Yes and no, they would also include the rental income if you have tenants occupying it.

Have you spoken with credit unions? We've had great success with them. 

Great post Sofia! 

@Jordan Lamarr Gay - shot you a message.