All Forum Posts by: Michael Voils

@Kenny Smith

interesting prospect. After the initial draw from a HELOC how quickly can I get another draw?

for example, I get a HELOC for 100k, but only draw 50 and use it for a down payment. How quickly could I draw another 25 for remodeling?

Could it be used quickly enough to cover an empty rental for 6 months?

I own True Vector Bookkeeping. Service Disabled Veteran-Owned, I think we can help each other out. https://www.vectorbookkeeping.com/

Great information both of you and I appreciate your responses!

@Vicente Terán I love the conservative approach you have and would under most circumstances agree. There are a few issues that are specific to me, however.

1. This would be my first rental property. I don't have any capital. I have a full family, and we haven't got the ability to "House Hack" under normal circumstances. The 6 month cash reserves to cover each property and the cost of living would probably take me five years to save up. I could use some of that 100k as the 6 month cash reserves, but that would only increase the amount I would need to rent it for.

2. With home prices and everything else I don't expect the property to be purchased outright -- at least some of it would require a loan. I don't see how it's feasible to get a net $1,000 cashflow unless I got incredibly lucky.

3. Your part on the market makes sense. That was my opinion as well, but I wanted outside input.

@Ryan Thomson I've done math on how it would change my mortgage and a new loan, assuming I doubled my APR, which could still be more, I'm sure. If I'm using the entire amount on a rental property, how would a HELOC benefit me over a cash out?

Looking at rough numbers, I doubled my APR and kept my escrow payment roughly the same on my home and the theoretical rental propety. I would need to rent any property out for at least $2,000 to cover my mortgage increase and the new loan in order to break even every month (Which, I know I can't bank on it being occupied all of the time and would need to find a way to cover that.)

I'm trying to figure out if this is a rabbit hole I should follow, or if I should scrap the idea altogether.

In this economy the value of my home has skyrocketed. I am eligible for a cash out refi of about 100k. Would it be practical, smart, ridiculous or whatever to cash out and use that money to purchase a rental property? Would it be better to hold on to the cash until the housing prices came back down a bit?

Unless you are acting as the general contractor for the project, you shouldn't have to worry about any contractor injuries while the project is underway. I'm not a lawyer, but it was always my understanding that once the GC took over, it's their job until they are done. Any claims or injuries would be made against the employer, not the home owner. The employee can sue the subcontractor they work for, which is actually what workman's comp is. It's an insurance that the employer pays in to to protect themselves from being sued. Workman's comp provides care and compensation in response to any claims and injuries, requiring proof and reports of the incident. The employer may choose (in Texas) to take that risk of the possibility of being sued by his employees. Being "bonded" is a different story entirely. That protects you from the contractors messing something up and costing you money. The GC has to be bonded to cover themselves for this. If they do something that damages or destroys your home, their bond will pay for it. It's an insurance.

TLDR; Not a lawyer, but it should be the contractor's problem to worry about employee injuries on the jobsite.

By that note, could you then use a DSCR to secure your first Rental property, granting that you use an LLC to do so?

I'm still in the research phase of my real estate journey.

I have an established family - married, three kids and a mortgage. I have only one vehicle that has a loan, the other is owned outright. I am not in a position to house hack. As a result, what I am seeing is that I will need 20% down for a commercial mortgage. I have about 12k liquid in the bank, and can possibly get more pulling from stocks, mutual funds, retirement funds, home equity loan, etc. I don't like the idea of liquidating my other assets though.

A $200,000 home would require a $40,000 out of pocket investment, which I don't have. Borrowing or co owning with family or friends is a possibility that I will keep in my back pocket.

If I were to use an equity loan on my current home for a down payment on a rental property it looks like I would have to find a home run property in order to break even -- paying down the equity on my current home and still having profit to reinvest in to the property.

I just have to figure out how to get initially financed.

What are the best options I have in my situation for getting a loan or a sum of money for a down payment?

Are there any Veteran or Disabled Veteran friendly loan companies that might go easier on the down payment? I'm using my VA loan on my own house, and you can't use it on a rental property anyway. Again, I'm not in a position to house hack.

As a prior electrical contractor operating out of San Antonio, TX: All of your contractors are required by law to have at least a contractor's license, and then any applicable licenses their subcontractors might have (i.e. Electrical contractors need to have a Master Electrician on record and at least a Journeyman on site). Workman's Comp isn't required in TX but you will want them to have insurance in case they ruin your house on accident and need to make a claim and/or sue.

Edit: MY Master Electrician's license is number 320624. Ask any electrician that you have to work in your home to show you his license. If they don't have one, even one on hand, don't let them work. If at least one of the workers doesn't have a Journeyman license, don't let them work.

That is all excellent information that I didn't realize. Thank you! 

I suppose I don't have anything else worth taking, just the savings that would likely be put in to the rental property anyway. 

That eliminates the first two questions. Anyone have anything on the other two, or should I repost those separately?

I'm still in the research phase of my real estate journey.

I have an established family - married, three kids and a mortgage. I have only one vehicle that has a loan, the other is owned outright. I am not in a position to house hack. As a result, what I am seeing is that I will need 20% down for a commercial mortgage. I have about 12k liquid in the bank, and can possibly get more pulling from stocks, mutual funds, retirement funds, home equity loan, etc. I don't like the idea of liquidating my other assets though.

I like the sound of creating an LLC to start my portfolio.

PROs (That I can see) 

1. Uses the potential profit of the LLC instead of my own credit and income to determine if the loan is accepted.

2. Limits liability for myself and family were we to get sued, or the house goes in to foreclosure (Due to poor planning on my part, most likely) etc.

CONs

1. Initial funding for the first rental may be difficult.

2. Extra fees associated with an LLC.

My questions are these:

1. Where can I find information on specifically starting the journey with an LLC? Videos, books, articles, blogs?

2. How, as an LLC, can I get funds for the down payment? A $200,000 home would require a $40,000 out of pocket investment, which I don't have. Borrowing or co owning with family or friends doesn't seem like it would help an LLC get a loan.

3. How do I actually determine how much to charge for rent? I can use the provided calculators to give a ballpark amount, but how do I figure out a specific one for a specific house? Trial and error?

4. Does anyone know of any Veteran or Disabled Veteran friendly loan companies that might go easier on the down payment? I'm using my VA loan on my own house, and you can't use it on a rental property anyway. Again, I'm not in a position to house hack.

Any help would be appreciated, thank you!