All Forum Posts by: Katrina Edwards

Another option might be a "contract of sale"  This may be more attractive for the seller if substantial capital gains are involved.  Probably requires an attorney plus a tax adviser.  Not too common but a potentially good tool if the seller is not interested in paying all their taxes in year 1...

that's what scares me....Ugh, so hard to decide. 

What factors do you think will contribute to increases in the prime rate?

Option two is the least expensive initially but carries a higher degree of risk. I.e. changing interest rates.

I've decided I'm probably going to keep this building forever, so paying down principal will give me more cash flow over the long run. 

Where do you think the prime rate is headed over the next several years?

Hi everyone. I've been lurking somewhat and responding to questions within my area of expertise for about a month now, but this is my first post to Bigger Pockets.

I need to make a decision within the next 24 hours.

I'm planning to refi a duplex that I own. Plan is to hold long term. It's a rental.

LTV is approximately 63% $475k loan, value around $750k

Decent cash flow

Couple of capital projects coming up in the next 2-5 years totaling about $25k

Here are my options:

1. 30 year fixed at 4.125% - principal & interest payments

2. 1st position HELOC tied to prime less 1%, adjusts when prime adjusts, can lock the rate sheet of the day (at any time) to a 5, 7, 10 ARM at 5 year treasury swap (H.15) rates plus 2.25 or 2.625 - minimum interest only payments due during first 10 years (I would continue to pay down principal). Can continue to draw down on available credit when needed for first 10 years.

3. 1st position HELOC fixed for 7 years at 3.35%, interest only due first 10 years, can draw down on credit line when available and needed first 10 years.

All of the loans listed above would cost me about $3k in closing costs (appraisal, title, escrow) and payback from a cash flow basis would be 7-8 months.

Thoughts on where prime is going in the next year or more?

Thoughts on locking rates versus rolling the dice (ARMs have been good to me for the last few years)?

I'd like to hear what you think. Pros/cons/forecasts/fears/warnings etc.

Thanks in advance!

I have not used it but did some serious research when I first started hearing about PACE and HERO loans.

Here are my takaways:

Both end up being special assessments on the property taxes.  This means that if you decide to pay off early, there are likely many hurdles if you can do it at all.

It increases the DTI for a buyer, so if you are planning to sell in the near future, it could hurt your sale, especially with lower end properties.

It increases the DTI for the owner of the property, so could impact borrowing ability.

The interest rates are NOT great. When I researched these programs, HELOC rates were around 3.5% and these loans were around 6-6.5%.

The commercials make them sound like a great deal, but I think there are better options to pay for solar and other resource saving improvements.

Remember, those folks who are approaching you are sales people looking to hit their numbers or make a commission.

I was originally excited about the prospect of using these programs myself and for my clients, but quickly shied away because of what I perceived as big potential future negatives.

I hope this helps.

Our state can be funny about cash out refinances when it comes to default.  Double check the guidelines with your lender.  There can also be tax consequences regarding deductibility of interest. Check that with your tax advisor and structure the debt between the properties from an income tax perspective accordingly.  

Oh, and your rate will likely be higher than purchase money.

I don't try to be negative, but you did ask about the "pitfalls". 

That said, Everbank, has a really interesting first position HELOC that you may be able to use to access your equity when you need it. PM me if you would like an introduction to my loan advisor there....I'm thinking about putting one on an investment property right now.

Oh, and yes, structure your new acquisition factoring in the "new" debt.

Hope this helps.

Hi everyone.  I've been lurking somewhat and responding to questions within my area of expertise for about a month now, but this is my first post.

I'm planning to refi a duplex that I own.  Plan is to hold long term.  It's a rental. 

LTV is approximately 63% $475k loan, value around $750k

Decent cash flow

Couple of capital projects coming up in the next 2-5 years totalling about $25k

Here are my options:

1.  30year fixed at 4.125% - principal & interest payments

2. 1st position HELOC tied to prime less 1%, adjusts when prime adjusts, can lock the rate sheet of the day (at any time) to a 5, 7, 10 ARM at 5 year treasury swap (H.15) rates plus 2.25 or 2.625 - minimum interest only payments due during first 10 years (I would continue to pay down principal). Can continue to draw down on available credit when needed for first 10 years.

3. 1st position HELOC fixed for 7 years at 3.35%, interest only due first 10 years, can draw down on credit line when available and needed first 10 years.

All of the loans listed above would cost me about $3k in closing costs (appraisal, title, escrow) and payback from a cash flow basis would be 7-8 months.

Thoughts on where prime is going in the next year or more?

Thoughts on locking rates versus rolling the dice (ARMs have been good to me for the last few years)?

I'd like to hear what you think. Pros/cons/forecasts/fears/warnings etc.

Thanks in advance!

I think that getting the right tenants is more important than getting "insurance".  I had a client who originally worked with one of those RPM franchises when she moved out of state and had a horrible experience.  Probably depends on the franchisee.

So, set your criteria (income, credit, references, deposit, pets) high and if the PM company wants you to make an exception, then they better have a darned good reason and THEY can cover the insurance.

Make sense?  If you have good tenants, you shouldn't need eviction insurance.  If you have a terrible tenant base, then set your rents accordingly and budget for the damage and rent loss. Sometimes having rents slightly below market can result in getting a number of applications from which you can pick the best fit.  Especially if you plan to hold the property long term.  

In 25+ years of property management I've only done five evictions.  Two were commercial and two were tenants placed by others.  The fifth was a good tenant gone bad after 7 years.

Good tenants = peace of mind.  Set your criteria for success and watch your management company closely.

Just my 2 cents.

Holy cow!  Sorry to hear this. Like others have said, it's doubly bad when you are living there and scared.  My advice:

Pay them to go away if you get an opportunity.  Your safety and that of your family and dog is not worth pinching pennies.  

Tell them that if they move by x date, you'll give them their full deposit back.

Give them a bonus for moving sooner.

Don't waive any rent.  If they don't pay right on time, evict them for non-payment.

Have them sign for the cash and return of possession and if they leave ANYTHING behind, have them sign that all items may be disposed of.  

Change the locks the minute you get the keys back.

Post a sign somewhere that tells people they moved.

A FOR RENT sign in the window may be helpful for their "customers" to know they have moved.  Don't put a phone number on it.

If anyone wants to check their rental history and get a reference, refer them to the seller and keep your mouth closed.  Do not discuss this with their potential landlords.   You have too much liability.  Just say that you just bought the place and don't have the rental history.

Be glad you're not in an area with rent control or a good cause for eviction ordinance.

Think about putting up your own cameras and letting them know you've done so - or just ask them how they selected theirs and tell them you're planning to do the same thing ;-)

Good luck and keep us posted on your progress.

I have a number of favorites.  Here are my top three:

1. Requirement that the tenant have the home PROFESSIONALLY cleaned and provide proof at move out + prorated painting/touch up reimbursement

2. Daily rent charge for unauthorized pets

3. Daily rent charge for unauthorized occupants.

PM me if you would like to see my actual language.