All Forum Posts by: Michael Lucero

first off there really isnt enough info for anyone to tell you what to do. You used subjective wording to describe your current returns and didnt state what % return you would be satisfied with so how woukd anyone know what is right for you. 

Also, this is a question you need to ask yourself, not other people. Only you know what you want to do, it seems you are just afraid of trying something you arent a pro at. Figure out what you want to do (make the most money I presume) and go figure out a plan to make it happen.

Building capital should be common sense, change your budget and spending habits so you spend less than you make. And/or go make more money. Why do you have a truck payment of $560 wow thats insane, is it for you self employed business and is necessary? If not get rid of that waste. Also, it appears you have only talked to one lender, come back after youve talked to 10+ and still know they wont lend to you. Diversify it between different typed lenderslike small mid and large banks, various brokers, etc. If your friend makes decent money, not sure how he cant find a lender, maybe he hasnt found one that will consider the rental income against the imvestment house payment.

Also, the part about not saying its an investment property, that would be considered mortgage fraud and is illegal lol.

Based on your post i think you need to spend a lot more time educating yourself.

Capex depends on the state of the property, so you will need to see it In person.

It also depends on how long you expect to hold it for. If you expext to gold it for 6 months vs 15 years, then then your expected capital expenditures will be mich lower or higher because over 6 months you may not need any large capex whereas 15 years may be enough time to possibly cause the roof or a structural problem to occur

are there any major repairs needed?

What you should do will depend on you, your situation, tenant quality etc. I own a few rentals and i have an hoa that the community shared water bill and sewage is paid for via the HOA payment, so i pay those. Everything else is under their name. I wouldnt want to pay for their negligence with electricity. Cable/internet are theirs too.

It depends on what you want to do and what the numbers look like. Do you stand to make $50K if you purchase it, but only $5K if you wholesale it? Need some more info before anyone can help you. 

David's response is great and relatively cheap or free. A majority of success is attributed to who you know and your ability/willingness to learn from those who came before you. Not sure what getting your license will do, unless you actually want to become a real estate agent.

What you have to remember with this Velocity banking stuff is that it really isn't this golden goose brilliant idea that some people make it out to be. If it was, everyone would be doing it. It's also the reason why smart people can't understand what is so "brilliant" about it, because it isn't brilliant or that helpful. People advertise it as a way to pay off a mortgage in 7 years etc blah blah blah it all sounds good to the ill informed or financial illiterate, but in all honesty, you could actually do that with any mortgage you want, you just have to be disciplined. The Velocity banking is more of a way to force you to diligently pay something off quickly. Another trick they like to talk about is how much interest it saves you, they typically show you how much interest you would pay over 30 years on a mortgage and take that entire interest amount as a % of the loan or house value, which is not a true % interest you are paying lol. And of course if you pay off a house in 7 years, you "save" a lot in interest, but you can do the same by paying off a mortgage in 7 years conventionally (albeit you would still pay a little more interest). This Velocity banking is more like one of those credit card hacking people where they have a slightly better rewards package on their credit card, sure they make a few bucks more, but the effort and time it takes to do it is not worth it to some people. Yes the method is probably slightly better than just using a conventional way of paying, but it's not absurdly better or genius. This is why it's so hard to try and understand why it's so much better, it's just not. Trust me, I'm a CPA and work in corporate finance and  I've sat through a demonstration on this.

You make a very good point about opportunity cost with the HELOC and it's a huge detractor from this method. Why would you seriously care to pay down a 4-5% mortgage quickly if you are an investor and can earn 8-20% on your money. I posed this same question to the person on stage in a 40 person presentation on Velocity method and the presenter gave some ridiculous response that didn't make any sense.

I'm not saying this is necessarily a bad idea or a scam, but rather not some crazy good thing. The benefit from a HELOC is that it allows you to front the payment for a month, which lowers the average amount you owe on your loan throughout the month, and thus the interest you pay is lower, whereas if you didn't have the HELOC, you would have to wait a month to see that decrease in interest. They then say to take that interest savings and put it against your mortgage again and keep doing that and you have it paid off in 7 years. Ok sure, why would I want to do that if my mortgage rate is 4.2% lol, why not take that savings and invest it. They target peoples emotions "pay off your mortgage in 7 years WOW!!!" when in reality it's probably not the smartest financial advice.

You do realize the bank doesn't care really what you do as long as you pay the payment each month. As far as the manager at the bank is concerned, he had no way of knowing what you were doing unless you called to tell him or ask him. That is why if you call to ask/tell, they may call it due just to protect themselves, whereas if you just do it under the radar (as 99% of people do), nothing will ever happen. Banks aren't in the business of being schemers like this trying to find people sneaking around, they literally just want to collect on that mortgage they have with you.

One thing to consider is how expense an LLC is in your state to maintain. In California it's cost prohibitive to some people, whereas in other states, it's significantly cheaper so it's worth the annual cost to do so.

How do your fees work and what are they, what is your experience in working with real estate investors, do you invest in real estate yourself, do you have an extensive network with other professionals in REI, such as attorneys, title co's, agents, etc.

You basically would like to find a CPA who specializes or knows a lot about real estate investing, so cater the questions around that.