All Forum Posts by: Mike Malfitani

This is my first thread on BP as I've been spending the majority of my time researching and reading on the forums, however I do have 1 quick question i was hoping you all could help me with.

I intend to use a HELOC on my primary residence for my first rental purchase and through my research i've learned that banks like to see funds in a bank account for a certain period of time, before they are willing to accept those funds as a viable down payment for a loan on an investment property.

This is interesting to me, because the obvious goal with a HELOC is not to use those funds until the last minute, since you are paying interest on them. However, if a bank states they'd like to see funds in a bank account for at least 2-3 months, before they are willing to accept those funds as a down payment, it doesnt leave many options.

Example: I need 20k down to purchase my first investment property and i have a HELOC for 100k. If i just pay myself from that HELOC into a bank account, how long do the funds need to sit there before the bank is willing to accept them as a viable down payment for the investment property?

Thanks everyone!

0 Votes

It's a free resource of thousands of real estate investors. If you are serious about investing in real estate, why wouldn't you take advantage?

If your goal is to become financially free by investing in real estate, it would make sense to surround yourself and talk with other people that are already there; dont you think?

Take Brian Burke's post above for example. He has invested in over a quarter billion in real estate and posts on this forum and is willing to take time out of his day to offer advice to people here, including complete newbies like myself. I'd have to be an absolute freaking moron not to take advantage of that.

BP is not your standard social media. I dont have a facebook page or a twitter, instagram, snapchat, etc accounts. I simply don't like them and value my privacy too much.

However i'm comfortable here and am trying to learn as much as i can. The only problem is, the more i learn, the more i realize the less i know...

I can already tell from my time on this site, that its almost inevitable that i will meet and work with some people here at some point. It's just a different vibe.

2 Votes

Do the numbers make sense if you pay asking price?

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Originally posted by @Account Closed:

Hey BP,

Now that I'm a few years through college and my mom has sold her house to move to a less expensive area, we have some capital we'd like to use to create passive income through real estate investing. Since we've gotten serious a few weeks ago, I've pored over Rich Dad books, Morris Invests' YouTube videos, Podcasts, and of course the BP forums and Webinars. It's been so enlightening, but its still a bit scary and confusing, so I'd like to ask you guys for advice in taking the very first steps.

We live in Maryland near Washington DC, and have about 100k to buy our first property outright; it has to be fully bought, that's mom's rule. In a few years mom will retire and move, probably to Florida.

Morris recommends buying a house worth ~$50k after renovations, in a C-class neighborhood, since these will have the best cashflow. I'm wondering about a few things:

- Should I buy out of state, so the markets and location and landlord laws are better,

or near where we live, to simplify the process so our first time goes more smoothly?

- Is it better to try to buy a house that needs work because it might be a better deal,

or that is already in good condition, so our first time goes more smoothly?

-Should we set up an LLC for this first house so it's protected,

or is it better to wait until later to simplify things?

- After we've found a property we like, what's the best way to assemble a reliable team, especially if the property is out of state?

And I'd love to hear any other advice if you have it.

Thanks so much,

Shafi

Welcome to BP!

I'm a first time investor as well and started researching on the forums just like you are now. My recommendation is to search out Morris Invest on this forum and make your own decision as to whether you feel it's a good idea to move forward with them.

There are other companies imo that appear to be much more promising for a first time real estate investment, however i must disclose that i have not bought from any of them; yet.

Curious as to why your mom insists the property must be bought outright? Using leverage you could acquire several properties with your 100k instead of 1, which is what i intend to do.

Good luck!

3 Votes

Originally posted by @Grant Rothenburger:

@Craig Oram Doesn't sound like a deal. I never buy or recommend anyone buy hoping for appreciation. Buy for cash flow not appreciation. If it does appreciate, icing on the cake. If not, well that's okay because you bought at a great price that cash flows easily.

This.

1 Vote

I'm curious how you were receiving rent checks for this property when it was never occupied? That is a huge red flag.

2 Votes

Tony, great work!

Any tips for new investors on how you were able to purchase almost 3 properties a year for the last 3 years?

Good luck on your continued REI journey!

0 Votes

Originally posted by @Rob Hakes:

@Jon Zhou I am closing on another one with Spartan Invest at the end of the week. Though there have been bumps along they way I have nothing but good to say about how they have handled them. They are a good company from my experience.

I would only use their pro forma as only a reference as it may not paint the entire picture. For my calculations I figured my hard costs (costs that i can plan on based on their averages). SO for this house that rents for $950 i can plan on $85 per month for management, $587 for the mortgage and then about $75 per month to cover turnover/tenanting. They charge one month's rent to re-tenant and then half months rent to renew, plus an average turnover cost to get the place ready is about $1100. So in a three year period (which is the average stay) you will spend at least $950 tenanting, $475 renewal, and $1100 improvements divided by 36 months. That leaves me with about $210 left to put some aside for regular maintenance and possible future vacancy longer than one month say about $50/mo

On the years that you have to do a full turnover, your returns will be meager if any.

I still believe this is a better investment than a moderate risk mutual fund because i will see about 8% cash on cash, plus equity paydown adds another 4% per year. And if the property appreciated 1% per year then that adds another 4-5% return because of leverage. This does not take into consideration extra income I should get for raised rental rates.

And it is almost tax free because of depreciation.

Spartan has made the process about as turnkey as it could be in real estate.

I think you just need to know its limitations. You would make alot more if you could do your own rehab and purchase these houses at pennies on the dollar. You also need to know that your exit options are limited for at least 5 years in my opinion.

It is a great investment for me.

Rob, the info on Spartan seems to be pretty good at this point. However, I've read several times that they are underestimating the costs of Vacancy and Repairs. Do they provide you with data to show why their estimates for vacancy and repairs are lower then what's traditionally seen?

It's literally the difference between whether you cash flow or not on the property, and i intend to call Spartan tomorrow to discuss this further.

Thanks!

0 Votes

very excited to see how this turns out. thanks for the thread!

1 Vote

All Forum Posts by: Mike Malfitani

Mike Malfitani has started 1 posts and replied 16 times.

Post: How long do HELOC funds need to "age" before using for investment

Post: How long do HELOC funds need to "age" before using for investment

Post: Why do you use BiggerPockets?

Post: Should I pay asking price for Turnkey property?

Post: A Bit of Advice Before Buying My First Property

Post: Struggling with "cash flow positive"

Post: Morris Invest Case Study 2.0

Post: Bitter Sweet Day Coming Up snif snif

Post: Another Spartan Invest Turnkey Case Study

Post: Spartan Invest Turnkey Case Study