All Forum Posts by: Katherine S.

@Jennifer Jacobs Jennifer, yes your cash flow will decrease if your refinance with a loan greater than you have now.  But your Cash on Cash return should increase, because you have less of your money in the property. 

The point of the refi is to take some of your equity out and put it to work in your next property.  You have to be careful that you leave enough in so that the original property will still have positive cash flow.

The ideal situation is that you can take all of your original investment out, and end up with a property that is cash flowing for you with essentially none of your money in it so you can do it again.  That's the "repeat" part of the equation!

@Andrew Postell I think I was a bit unclear about my purpose for using the equity. I'd like to increase my portfolio by buying fixer uppers at a discount, perhaps with cash, doing some rehab, renting and then refying those properties to pull the initial equity out. That could repay the HELOC, or could be used for the next purchase. I'm not looking to have HELOC loans out for more than a year or two at most, but I could be taking out one, repaying it, and then taking another. Rinse and repeat.

Going with a HELOC, I'd be funding my next purchase with OPM, without reducing the cash flow on the original property. If I do the cash out refi, I'd be using my money, and I'd be permanently reducing the cash flow on the original property.

The more I think about this, the more I am leaning toward a HELOC, unless I am missing something in this equation?

Are there any different considerations in buying from a wholesaler if you're buying the property as a rental?

@Roy N. Thanks Roy.  I currently have 30 year fixed mortgages on all three.  Shorter term or amortization would negatively affect my cash flow, and a refi would probably be at a slightly higher interest rate than I have now. 

We own 3 identical homes on the same block, purchased 3/2015, 12/2015, and 10/2016.  The first was a short sale, and was purchased as a place for our daughter to live in while going to college.  She pays rent that is basically B/E.

The prices on homes just like these in the neighborhood has gone insane in the past couple months, and they are selling in less than a day.  I'd like to take some cash out of these homes to use to purchase more property, but have two questions.

First, should I wait until the property values have increased enough that I could take out my entire initial investment before doing the cash out? This would eliminate the last house, and probably the second one because of the improvements we put into it, although it would be close. This seems to me to be the most sensible thing, though, considering the cost of doing the refi. I would only want to go to 75% LTV.

Second, we have the most equity in the first house, well over our initial investment. However, if I refi, I will be in a negative cash flow situation because my daughter can't afford to increase her rent while she's still in school. I'm interested in using the cash to help purchase BRRRR properties, which if done properly would return my initial investment, which I could use to pay off the HELOC, but I would be locked in perpetuity (albeit at a lower rate) if I refi. So which is the best approach? Can you even get a HELOC on an investment property?

I'm kind of answering my own questions, but I'd appreciate your input.

Devil's advocate here.  As home buyers, my husband and I have looked at a lot of homes during our lives.  Only once were we asked to show a pre-qualification.  

We were starting our search into lakefront property near where we live.  We wanted to see a fixer that was priced far, and I mean FAR below value of the house we currently live in.  We live in one of the highest net worth areas in town, so the guy should have had an inkling we were qualified.  

It's not that he asked for it.  It was that he DEMANDED it before he would even talk to us about the property over the phone.  Then he went on to tell us how busy he was and couldn't waste time with tire kickers.  Never asked any qualifying questions.

The house remains unsold three years later.  I have kept his name to make sure I never do business with him.

If you're going to require a pre-qualification before showing a property, use a little finesse and don't piss off your buyer in the process.

Our tenants are responsible for mowing the lawn, but we have a weed & feed service come in several times over the season, which we pay for.  Hubby can't stand weeds and it's good for curb appeal.

Tenant has been late, and paid the late fee several months in a row, and pays with money orders.  Last month, late again, and when called, he said it was "in the mail".  Right.  Ok, can you show us your receipts for the money orders?  "I must have washed them in my pocket."  

We literally had the eviction papers ready to file when he texts my PM with photos of the money orders and the envelope that was just returned for postage, dated the very day he said he dropped it in the box.  When PM goes to pick up the money orders, he says, "That's the first time it ever happened."  What's that?  "I never put stamps on anything and they always deliver the mail."

Wow, I guess we must be mean.  Due on the 1st, late on the second.  I have discussed changing the late fee from simply $50 to $50 on the 2nd and $10 additional each additional day late (thanks to something I read here on BP).  Plus we're going to encourage paying on line.

I have observed from my starving-college-student daughter that the due date is considered the "MSRP", and the late date is when she has to pay.  Since she has to collect from roommates first, this is a monthly challenge. (She's not a tenant of mine.)

@Nicholas Patrick As a young man, I'm sure 59 1/2 is a long way off.  But you'll be surprised how quickly you'll get there!

My husband and I are late to RE investing. The money we have in our 401(k)/403(b)/IRA accounts is more than we have in cash on hand to invest. So we're excited about the prospect of tapping into a bigger pot of money to use to invest.

One aspect we find very interesting is the ability to take out loans that can be used for any purpose. Say, for example, helping make a cash purchase outside the 401(k) in a BRRRR that can be repaid with the proceeds when the property is refinanced. Rinse and repeat.