All Forum Posts by: John Woodrich

I started investing in 2007 and we started using LOCs to pull equity around the 2008-2009.  We didn't have any issues with them being called, ours were 15 year lines, maybe yours was different with an annual renewal?  You would have to read your loan docs to figure out what your rights are vs theirs in calling the loan.  I wasn't connected to many/any investors when I got started so not sure if my local credit union experience is normal or not.  I am very connected now and haven't heard of banks calling LOCs.

If they haven't already you will want to recommend they apply for unemployment.  They will get part of their wage plus $600 per week ($2,400 per month) after the fed stimulus bill so they may be making more on unemployment than when they did work.

@Matt Higgins I have been hibernating a bit with tax season. On one of my LOCs I had to pay for an appraisal but other than that no other costs. Like you I have some paid off property that I use them on so they are 100% collateralized by RE. There are companies out there who will do non-collateralized LOCs or loans and I agree, those options aren't cheap. LOC is a good way to maintain some liquidity while not paying interest on cash sitting in an account. If one was to complete a cash out refi for $100k, it may cost them 2-3k in fees just to get going. Sounds like points on a HML :)

@Allen Lemay if you haven't solved these questions feel free to reach out via email.  I would prefer it wait until after 4/15 if it isn't urgent.

Curious about your thoughts on what the "really really cold region" means and what impact it has on cashflow and pricing.

The hot topic seems to be when the recession is going to hit and this has been going for a few years now...  Still isn't here.  The one thing that seems constant is that when money is cheap, there are no deals.  When money is hard to find, there are deals in RE.  We were "lucky" to get going back in 2007-2008 however we were buying houses when everyone said that is a horrible idea.  It wasn't luck, it was a calculated risk.  

I have been telling my clients the last 2 years to get a LOC so they have money available if something comes up or if prices start to drop. With a LOC they don't have to go through the costs of a refi and aren't paying interest on cash they don't need. In many cases the bank will even eat the appraisal costs. With rates very low I still recommend this as the best approach.

For someone with a fire to grow, a reverse 1031 is more feasible in this market as many want to sell at current prices but they don't want to purchase.  This gives you the option of finding a deal you want, then selling your current property via 1031 exchange so you pay no tax.

Thanks for the recommendations, my head has been buried in the sand for a bit this tax season so I haven't been on here as much.  I wouldn't want to over commit and under deliver so we probably shouldn't take on any more returns if you want to get filed before 4/15.  We could extend and file after but I don't want to start off on the wrong foot.  It is important to get the first year filed correctly, we amend too many returns for setup issues.

@Michael Plaks I have to admit that I haven't spent enough time digging in yet but I do agree with your thoughts that land improvements are still real property for the purposes of a 1031 exchange.  It is clear that we may have issues with allocations to 5-7 year assets but I think this is one area we are safe.  A back end cost seg may be the ticket for the other assets.

1. Contract for deeds are normal in MN.

2. Many MH investors separate their investments into two components A) the real estate and B) the wheel estate.  On the cover the POHs seem like a good way to collect rent but they also come with the normal maintenance, frozen pipes, etc issues of running a rental property.  The problem is that the repair costs are similar to the cost for SF homes and the rent is quite a bit less so repairs will wipe out your income a lot faster.  The people I know in this area do not want to own any homes and this can improve the quality of tenant at times as they are looking at it as their home.

If your contract price is $30k and ARV is $50k I don't see much equity after this is said and done. As mentioned - will they allow you to drill a new well? I am not sure if you have completed any water quality testing or if you have tested the system for pressure drop but I would suspect that you may have nitrate issues on a sand point and you may have pressure/flow drop if you are trying to run a couple fixtures at the same time. Even if the well seems to work fine now I would plan for city water or a new well in your future.

The city should tell you the WAC fees, as Ivan mentioned these can run from $1500-$3500 depending on how greedy they are and that doesn't include the excavation to get there. I have dug 2 water lines and they were roughly 8-10 ft underground, 4 ft may work but if you are digging a hole it may make sense to go a bit deeper to give you some additional protection.