All Forum Posts by: Mario Arellano

@Jason Shackleton - thank you.  I appreciate the information.

@Jason Shackleton no Jason, they are not.

Hello Members, I would like to ask for your experiences/stories/advice on HELOCs. We have 2 rentals with a large amount of equity and a cash out refi on one of them fell through b/c the property is no longer our primary. Besides the option of selling them, we were looking at a HELOC to use the equity on our next investment purchase. Can you your share your experiences if you pursued the HELOC option? Are there penalties or fees to look for if we want to pay the money back early? Do we go with a variable rate or a fixed rate? Our plan is to use the money to purchase our next investment property all cash, do a BRRRR, and pay the money back to the HELOC upon a refi (after repairs). I appreciate your insight.

Just wanted to share some lessons learned to the New Investor community.  

My wife and I were fortunate to close on a SF home in North Carolina in Jan of this year (2021).  We decided to purchase the home b/c the existing tenant rent payment was under market and we had cash that we wanted to invest in real estate.  The tenant's lease ended in Feb 2021 but chose not to leave because she didn't want to.  Eventually, she decided to leave in March and we started the minor cosmetic work to have it rent ready.  What I didn't plan was the timing of our other rental property in California, where the tenant left in the same month (March).  We decided to make improvements in that rental and we had to carry the mortgage and pay for improvements at the same time.  

The lessons I learned from this experience were the following:

1.  Separate your savings with the money that is used for your investment property.  We didn't have this set up and as we continued our spending, my wife noticed how quickly our savings were depleted.  We knew this was going to occur, but it had a pyschological impact on us both, especially b/c we were spending on (2) rental properties.

2.  Make sure understand the risk in terms of having an existing tenant in place.  I believe Brandon T. and/or David G. on the podcast recommends to never have an existing tenant when you purchase an investment property.  I have also heard opposite advice from guest on the podcast.  I would recommend to asses the risk, run 'what if' scenarios and see what you're willing to accept.  I don't regret this deal in North Carolina because fortunately, we could afford the risk for our long term goal (buy and hold, long term).  

I hope this helps new investors and keep reading the information that is presented in this forum.

Mario

Hello Everyone - great thread and very informative. We (wife & I) built our ADU in the City of La Mesa in 2018 and I was able to obtain it's own address. We are currently looking at a cash out-refi on the property and I have been trying to get a conventional loan with the lowest interest rate. The main house is currently rented and we use my ADU as my main address (deployed overseas, home of record). My lender has informed me that I'm unable to qualify for conventional loan b/c the main house is rented. I have been arguing that the property is like a duplex, where I currently live in one and the other is rented. However, I have been unsuccessful in winning my argument. I'm curious if anyone else is or has gone through a similar situation?

Hello David,

My wife and I just started investing in cash flow properties. I’ll share with you what I have found in terms of finding a market to invest in. Just like you, I’m from California (San Diego) and the current prices are too high for our current strategy. I began by researching the BP forum and reading what others are saying. Placing keywords such as ‘hot markets’ in the forum search has helped. I also started a google notification/alert to receive articles on similar keywords. I don’t read them all, but I’ll check the headlines and get information on different markets. Personally, we are currently looking at conventional type loans so our price points are lower in comparison to CA prices. One of the books that I’m currently reading (all from BP book list) talks about looking for areas that have growth in Jobs, Income, and Population. I placed this information in google and you’ll get a lot of results, with lists of the ‘fastest growing cities’, etc. I try to dedicate a couple of hours each weekend to read about different markets and then I select one to do additional information. One other item that I have done is to look at where the big homebuilders are investing in. For example, DR Horton’s website contains information on their new products and my assumption is that they have done their market research.

My final comment is in regards to the connections/networking that you do when you find a location to invest in. Every book and every BP podcast that I have read/heard all say the same thing, it’s about developing a good network that will make you successful. I’m currently working on this aspect in the areas that we’re interested in investing.

Hope this helps.

Mario

@Jesse Daconta

Great advice...Thank you

I made the error in using information from Zillow on the cost of my property taxes.  I dug deeper into the cost by going to the county's website and the rate was higher.  There are also annual fees for trash and stormwater services that I'll have to pay.  The error doesn't kill the project but it does impact the cash flow amount.  

The error was my fault.  It wasn't difficult to find out what the current tax bill was/is for the property that I was looking into.  I know that market values can & will change, causing an increase in the taxes.  Either way, I will not be making this same mistake again.  

Hope you can learn from this mistake 
  

I appreciate everyone's help.  We're going to go with the cash out refi for our socal home.  We plan to get an interest rate 1 point lower to the current rate and keep our P&I the same.  Thanks again for everyone's input.

@David Kelly

Thank you David