All Forum Posts by: Micah Watson

@Russell Brazil

Thank you for clarifying. Very helpful

Just wondering. If the home value is too low for selling to make sense in the foreseeable future, why would you choose to loose $115/mo indefinitely? He has said he’s currently cash-flowing. Would he not recover closing costs in 2-4 years?

@Andrey Y.

I’m so sorry you were duped. I agree that it’s a shame on them/shame on you combo, but let’s move on to what can be done.

You have said it’s currently cash flowing but you are approaching the point at which your interest rate will jump to 9%, as scheduled.

I haven't read anyone suggest removing it from your IRA. If, as you say, you have had a great track record as an investor apart from this deal, why not pull equity from another property(or several, if you are highly leveraged), using a fixed rate home equity loan(or several). You could purchase this property from yourself and would then own it free and clear opening the door to refinancing into a standard recourses loan.

Home equity lines of credit are very readily available and the best thing is that the lenders often pay all fees except the appraisal. You would, of course, be appraising the properties that you are using to secure the line(s) of credit. Put you would be paying one set of closing costs to refinance at the current interest rate.

If I missed something, let me know! I’m currently self-educating on all things financing, but am nowhere near an expert.

Thanks!

Micah Watson

@Frank Wong

I’m intrigued. I’ve used a couple of 0%/12mo store cards but not sure if that’s what you mean.

I'm in a similar boat. Don't give up on your first plan with the HELOC! I had to call a couple lenders to find one that would do a HELOC on an investment property, but they are out there. I actually found a few before choosing one. PM me if you'd like me to share the name of the institution that I'm in the process of using.

All that being said, I don’t see the problem with using your primary residence as collateral. At the end of the day, if all depends on your plan, your situation, and THE NUMBERS. :)

If it’s me, I’m looking at the best and highest use of the property. Those advising a cash-out refi are probably not considering whether this property will meet the 1% rule or not. What do condos rent for in your area? I would tend to think that it won’t rent for enough to justify a new $375k mtg. If that’s the case, I’d sell and begin looking for the best way to invest $200k.

@John Warren, 100% LTV? That's crazy. I have never heard of such a thing. I'd be happy with 80%, also I want to be a bit more conservative in a bull market.

Do you mind sharing which lender was willing to do that?

What puts the third R in the BRRRR strategy for you?

I am new to this, but it seems that it’s assumed everyone will use a cash-out refi to pull their money out each time.

If you were to instead open a line of credit(HELOC or other), couldn't you avoid paying closing costs twice per property by using the following order of operations?

Buy and Rehab with Line of Credit, Rent, finance(notice I did not say refinance), pay off line of credit with newly closed upon mortgage, and repeat

BRRFPR, if you will

I’m very curious to know what holes you see in this and, in general, what you think!

Hey guys,

I applied for a HELOC against my one and only rental property(yes, many banks will do HELOCs on investment property). I shopped around for about a week analyzing rates and terms. This particular credit union had the best terms for my purposes, because I plan to put the money back about 4 months after borrowing it, so the interest rate is very predictable in that window.

The problem is that the lender is saying my DTI(debt to income) ratio prohibits her from lending more than $7600 because the interest rate cap is crazy high(16% maybe?). My DTI is about 33% and about 26% when I factor 75% of my rental income into the equation.

Has anyone else had similar issues with HELOCs? I love the idea of a HELOC because I can borrow and replace the money over and over without reapplying each time.

Hey guys,

I am early in my journey, with one deal under my belt. I have stable income, but my goal is to use the BRRRR strategy to leverage equity/forced appreciation rather than constantly saving and contributing my own cash to deals.

After shopping the best rates, I applied for a HELOC against my first rental property, with the goal of pulling 30k-ish out to use to jumpstart my next deal. I was told that I could only borrow $7600 due to my DTI ratio and the worst case scenario of the interest rate spiking to I believe 16%. It's crazy because my DTI ratio is only at 33% or 26% if you consider my new rental income. I'm not terribly concerned with that particular lender. I'm sure I can get around it by taking out a home equity loan rather than the line of credit.

So the question is this: will this not become an issue every time I attempt to refinance and pull money out of a deal? 

Here's the scenario: I purchase a property using temporary financing, whether that means high interest(hard or private money) or short term(HELOC, etc). But then the rehab on my property wraps up, my tenants move in, and I'm stuck trying to finance something but struggling to get a lender to give me a loan. Is this too big a what-if to be concerned about? After all, supposedly I can keep borrowing up to a 41% DTI and 75% of all rent can be counted?

I'd love to hear from anyone, especially those with experience using HELOCS in the BRRRR strategy.