All Forum Posts by: Brant Richardson

It's just as much work for the bank to originate a 42k mortgage as a 84k mortgage.  A lot of them won't even bother doing one for less than 50k.  

If you are already happy with the price you agreed on and you are worried about losing the deal, it wouldn't hurt to offer to meet him half way between the appraisal and the agreed upon price.  Otherwise just get the second appraisal.  

Liability scares the heck out of me.  I don't even like to let friends borrow my car for an errand.  If the driver accidentally runs over a kid on a bike the lawsuit could go way over your million dollar insurance policy. 

@Luke Grogan

I didn't realize that you were managing all your properties remotely.  In that case selling the out of state property because it is out of state doesn't make sense.  It sounds like that property is worth significantly more than the others so maybe your cash on cash return would be higher in FL.

Is there somewhere you like to travel every year for family or vacation?  That could be a business trip that you right off the taxes if you have a property there.

With a question like "When to sell?", maybe what you really want to know is if the market is about to drop and now is the time to sell.  Don't we all wish we knew.  

If Mr. Sugar used a HELOC + traditional financing to cover 100% of the purchase price and the property still cash flowed then the HELOC would be "free money". However, repeating this he will quickly hit his debt to income ratio maximum and will no longer be able to get traditional financing for the next traditional style real estate deal. Also, he is getting into the paralysis by analysis zone so I would say it would be best to keep it simple for the first one. Involving his personal residence adds one more layer of fear which adds to the paralysis. I would recommend concentrating on finding a good deal and use a little of your cash, that is what you saved it up for. If you want to take out a HELOC later to replace that cash that option is still on the table.

#2 If your years of cash savings are enough for a down payment then don't mess with a HELOC for your first rental, the rate will be higher. Ultimately your debt to income ratio will be what inhibits you from getting more money loaned to you, whether it is a HELOC or conventional loan. If you use a HELOC for a down payment, then borrow more to cover the rest of the purchase you will hit that maximum DTI all the sooner. So there is a balance between using your cash, taking on debt and increasing your adjusted gross income. Some banks want to see a year of two of success as a landlord before they even count your rental income.

What is the reason these people are giving you that you will have to wait years before doing your next deal?  Lack of funds for a down payment?

It sounds like you have a really good set up as things are.

You didn't mention it, but obviously you know what you are doing, so certainly you have thought about the tax consequences of selling.  To try to sell all of them and 1031 all of that into something else within the time limits would be tough.

The other thing you didn't mention is if you like where you are living and would like to grow old there.  It sounds like you are at least open to leaving the area.

I say sell the out of state property and 1031 that into the next purchase.

When you are done with that then rehab the property's that need it and maximize rent on them.

That will give you some time to think about whether you really want to go through all the work of starting a whole new portfolio. 

If you decide to take him, you could offer a shorter lease (which allows you to get him out if necessary) but also give a guarantee to not raise the rent for 2 years (to help satisfy him).

Taking on debt then showing that you are responsible enough to pay it back, on time, every time, builds credit.  My understanding is that if you never have a balance on your credit card it doesn't really build your credit score much.  If you could buy something with a lower interest rate than a credit card and pay it back slowly that builds more credit, like a major appliance or vehicle.  Sucks to spend money when you are trying to save.  Maybe if family needs a new frig, they give you the cash and you buy it on credit.