All Forum Posts by: Mar Now

I have one rental property with no mortgage. I want to have funds available for my next deal so I went to try to get a HELOC on the rental. One bank, a credit union with which I had an account for many years, offered a type of HELOC at 6%. Another bank that I have a checking account with doesn't offer HELOCs on rental properties, but offered a mortgage at 5.25%. Each will waive closing fees because of my other accounts at those banks.

I can see that with the HELOC I would only take out the money I needed and save interest that way, but with the mortgage I suppose I can reinvest the money not being used on new house deals somewhere else at a higher return than 5.25.

Any other opinions on what is the best way to do this?

I read the post below about the injured tenant and the value of having the properties in an LLC. Maybe it's discussed somewhere else, but I want to know, does everyone own their properties as series LLC? If not then how? Years ago when we first started buying properties we just held them in our own names which I know now was dangerous liability-wise. Just want to see how others are managing rentals. Actually flips as well as I suppose there is a risk there too.

@john leavelle, thanks a lot, this thought process helps.

@Derek Kirkwood, well when you find the 2.5% properties let me know  :)   Yes I think your way of thinking is right - would I re-buy it for $300k for that rent.  Probably not. 

Another thing, it's sort of hard to get my head around the statement about $1.5M in properties.  We've held some SFHs and eventually paid them off, but both of us were working and didn't consider RE our primary income.  Now i am considering retiring and I want to ramp up.  But thinking in terms of millions in property and considering loans of that amount is pretty daunting, coming from years of no mortgages at all. I would like to ask@John Leavelle and others, how do you get over that psychological hump of owing large amounts, even if income stream is very stable?

I know the 1% rule has been around for a long time, but I have never yet lived in a metropolitan area that gives 1% as a rule. Many examples on this site have like a 10 unit building for what I'm paying for a 3-flat or a SFH for $100k that brings in $1200 rent. That just didn't happen in the west coast or now where I am in the Chicagoland area. Unless I'm totally missing something....

So maybe my SFH would not get cash flow if I got a HELOC and did the 70% rule - So then would you say it is not a good investment and I should sell? I would think it is or it isn't, regardless if I take money out of it or not. If it's not, I'd rather just sell and try to get something else where I currently live. I don't want to judge its value differently just because it's paid off. My money is still sitting in it, doing nothing.

he other problem I see is neither of these properties reach the 1% rule of monthly rent to purchase price: 5,200/710,000 = 0.73%, 1,700/350,000 = 0.49%.

Is that the right way to look at it, since I didn't pay $710k (offer is $425k) or $350k (I paid $150k years ago).  Wouldn't you use the price you paid to do the 1% rule?

All together the costs of HOA, taxes, ins and property management fees are $450/mo.

What type Multi Family Property? How many units?    3 -flat

What are you basing the ARV on? Comps or Cap Rate?    Current comps for both

What condition is it in? Livable? Currently have tenants?   Yes, all units are fully rented and in decent shape so rents are accurate. But 3-flat needs some work to bring it up to same level as the house

What kind of financing are you planning on with 20% down payment? Investment properties are usually 25%.  I actually thought of doing a cash purchase, that's how we always held our rentals.   I can pay whatever makes sense.

You currently get $1,200 Cash Flow from the SFH? Why sell? Why not get a HELOC instead. If it is worth $350,000 you could get $260,500 (75% LTV) to invest with. Make interest only payments until the new property is Rehabbed, rented, and Refinanced. Payoff the original loan and the amount you pulled out of your HELOC. Then you can do it again. That's called the BRRRR strategy.

I know this sounds odd but I was hesitant about getting a mortgage.  We usually worked in cash only.  I know it probably doesnt make sense to keep all your money holed up in one or two properties but I have to get over that psychologically I suppose.  

I have a question about comparing a property I own to one I have the opportunity to buy.  I want to evaluate if the second is a better deal, and if so, maybe I will sell the first.  

I own a SFH worth $350k with no mortgage. HOA, taxes, ins and property management fees are $450/mo. and rent is $1700. I've had it for 15 years and just haven't revisited selling it.

I am interested in purchasing a multifamily building which needs rehab work.  Purchase price $450k, rehab costs $120k, but expected value $710k.  Rents would total $5200/mo. I would possibly put 20% down, mortgage, tax, ins, mgmt fee = $2500.  (Kind of oversimplified, I know I'm ignoring repairs, vacancy, etc. for now)

So to compare, would I use cap rate?  If so, on what I paid for each  or on the final value?  The first was purchased so long ago that it's initial price doesn't seem relevant anymore. I'm worried I'm just not getting enough rent, that the money could be better used somewhere else.  

Thanks.

What do you have in 60624, rentals or flips?  Which particular area do you feel is getting better?  I've driven through there on occasion and  always wanted to get a look at that park but end up feeling a bit nervous.

A friend has a place in 60618 and we tried to look there but it's very pricey now.  What have you found there?