All Forum Posts by: Account Closed

I'm in the process of getting a HELOC with lower.com, and the rep gave me an interesting option that I am trying to poke holes in (devil's advocate), but I am having trouble doing so. What are everyone else's thoughts?

Option 1: HELOC with lower for 50K. Ten-year term, interest only prime +1 monthly payment. Of course, whatever I have pulled out needs to be paid back in full at the end of the 10-year term. We initially thought this process would take 30 days, now saying 120 days for several reasons, and most banks are in a similar situation. My current mortgage lender said it would take more than 30 but less than 120, and yes, there is a delay.

Option 2: He told me about this earlier today. Due to living in Phoenix, my house has increased significantly, and we made some updates, and I could do a cash-out refi. Currently, my mortgage shows the home is worth 320K with a 3.25% rate paying $1,450 PITI. Last week my house was appraised for 435K. He said they could do an 80% cash-out refi at 6.1% and drop my PITI to $1,330 while giving me the 20% to invest. This was my goal with the HELOC.

This seems too good to be true. Any thoughts? I'm not sure how he is getting $1,330 PITI because when I run the numbers, the payment should be $2,100. I plan to ask him this next time we talk.

I like this because my monthly payment would decrease (if the math checks out), and I plan to turn this home into a rental in the next 1-2 years anywhere. This is not my forever home; it's business. I would also have more money to invest.

I don't like this because it seems too good to be true; my rate increases, and I just refinanced in September 2021 to get to 3.25%. This is after buying the home in November 2020. 2 refinances in 2 years seems like a lot, lol.

Thanks y'all,

 Same here, man. I keep finding more and more reasons to empty my 401K and buy cash-flowing assets with it. Been too chicken to pull the trigger yet, lol!

 Are you looking to buy and hold or flip it or what exactly? Like Logan said the market may soften (due to interest rates), but prices are not going down. Even if they do, they'll always come back up and eventually surpass what you bought them for. Don't use this as an excuse to buy a bad deal, but check out the below link.

Hi Everyone,

My parents tried the STR thing out for almost a year and decided it was not for them. They bought a beach home with cash a while ago but have decided to take their money and run, seeing as it has already appreciated more than expected. I was sad to hear this as it could be a real cash cow in the warmer months, but it's their call in the end.

On to my question. I think I know the answer to this, but I would love to hear some more experienced investors' thoughts and reasoning. Which below option would you choose?

Option A: They have agreed to sell me the property for market value. This STR would bring in $20K+ profit annually based on the numbers.

Option B: They bought the property cash and have agreed to be a private money lender for future deals if the guaranteed return is worth their time.

Should I purchase an STR with solid cash flow and appreciation potential in a beach town or use their cash to fund multiple deals a year? Some of you may ask me, "will these multiple deals equate to $20K+ profit annually?" My answer is, no, not based on rents alone if I do buy and hold. It would eventually turn into a yes if appreciation continues and I sell these properties for a solid profit in 3-5 years.

Thanks for your time,

No, you do not have the right to terminate the lease agreement since the agreement is not between yourself and the tenant. The tenant has the right to the lease they signed, regardless of what it says, until the end date. After that, they will either leave, you can have them sign a new lease (with your terms), or have them go month-to-month. Once they are month-to-month you can raise rents, give them 60-days notice to vacate, etc.

You could offer them cash for keys when you take over the lease. If you are unfamiliar with what this is, it is when you basically buy them out of their lease. "I'll give you X dollars to sign this contract agreeing to move out early by Y date."

Do you have a property in mind? How much longer is left on the lease? Utah's appreciation is nuts right now. Depending on how the numbers look, it may be worth it to eat the $500 loss until the lease is over if the property is appreciating more than that each month.

Thanks, everyone, very helpful! I understand that we would be splitting the net income after expenses and debt service. What I did not understand was who paid for additional expenses after what would have been our income ran out. Based on your responses, it makes sense that each of us would pay 50/50 or whatever we agree to before a contract is signed.

@Arn Cenedella - Your comment about raising additional funds for cap ex is a great idea and something I had not thought of. I'm not sure I will need to do this for a smaller 2-4 unit (it would depend on the property). But when I get into commercial properties, this makes sense. Especially for your $4M apartment. Congrats!

Thanks again,

Michael

Hi BP,

I'm learning more and more about multi-family investing, but I am having trouble finding the answer to a specific question. If I have a partner that wants to fund the downpayment on a small complex, but then do nothing except watch the cash flow in (I think this is called a general partner). Who pays for expenses that pop up? Examples being common things that take place with tenant turnover or larger expenses like a new AC or roof? I assume there are different answers for different companies, or if I am partnering with one person vs. a syndication.

A specific example is if this partner funds the down payment, we then split net annual rents 50/50, and when we sell or refinance the property he/she receives 60% of the equity and I receive 40%. The annual net rents includes setting 10% aside for maintenance. The partner would also receive and additional 8% of their downpayment when we sell or refinance in 5 years (non-compounding). If the cost of CapEx exceeds our maintenance reserves, who fronts the cash?

Any help is appreciated, or if someone can point me in the right direction to find the answer and learn on my own, that is appreciated as well.

Thank you!

There is definitely a big market. A few buddies and I spent a week at a STR in the middle of July and they were charging $1,050/night. The property is your average single-family home (except for the 12 beds) in a quiet neighborhood about 15 min from the beach. I spoke with the owner and he said it was his first STR. They bought it in February for 620K and put another 40K into it. He listed it on Airbnb and within 10 days he had all of memorial day weekend through labor day weekend booked. My jaw dropped lol.

My folks are about to close on their first STR in Plymouth. The sellers put them in touch with a long-term renter who rents it from November - March at 3K/month. They plan to list it as a STR for the remaining months of the year.

@Mark Zippo and @Steven Malatesta I'll send a DM as well, if that's okay.

Based on the last five years of growth I would bet Scottsdale (pretty obvious) and Gilbert.