All Forum Posts by: Herndon Davis

 1-Use your personal credit card to purchase the second property .

2-Use business credit to purchase the second property

3-Go to a site like LendingTree and apply for a personal installment loan and use as the reason to consolidate debt but do not ever put anything real estate related because it will get rejected immediately

4-Borrow against your 401(k) by the second home.

5-Partner with 5 family and friends in buying the second home

1- First of all avoid the big tourist trap resort areas. They all have appreciated in value and you will be buying at the top of the market. The only exception is if you buy something totally dilapidated and those properties are quickly snapped up by wholesalers and local developers. 

2-Focus on second and third tier resort areas that are in states that no one thinks about. 

3-Focus on second and third tier resort areas near the big tourist resort cities.

4- The only alternative is to create a resort area. There's lots of empty acreage of land across America for dirt cheap. 

5-Start off building cabins around a lake or an RV parks overlooking colorful scenaty. 

6-Price them for American working families and not for well heeled and monied folks.

7- Make money on volume and not on margin

 Change is coming so be a part of the change .  You know the neighborhood better than a days so work your contacts from the neighborhood church, friends etc. 

Pitch yourself to the headfunds working not just on a fee or commission basis but with some equity or skin in the game.

Finally you should consider commercial property as well because once residential is tapped out the next thing to do is create commercial spaces to serve the new residents.

Whatever you do don't wait because it's already too late

You're not using the right investor friendly lenders. 

You do NOT want use traditional Fannie Mae/Freddie Mac type of loans because they have way too many restrictons!!

Instead use Non-QM (Non-Qualified Mortgage). Most refinance cash back you will get is 75% but no stress or haggle or excessive proof

HML have intentionally high interest rates, high points, interest only and are short term 6 monthts to a year.

Not sure where the advantage is 

It's done 1 of 3 ways.

1- All Cash sales. Not many people have the funds so this isn't feasible for most.

2-Buy multiple properties through Conventional Lending (Fannie Mae/Freddie Mac) type of Conventional loans, which I don't recommend. Although you get the best rates, they count and recalculate your overall personal debt ratio each time, making it harder to qualify; they use personal income and tax returns as part of the approval process, you can't use all of your rental income to qualify for the next loan. You can't buy in a company's or a Trust name to protect you from liability and lawsuits; you can't combine all your different mortgage payments into one Portfolio Loan; and you're capped at 6 and 10 properties depending your program.  But despite all the drawbacks, many people still do it.

3-Use Non-QM (Non-Qualified Mortgage) products AND use BUSINESS CREDIT to supply the down payment.  First with your near perfect credit score you can enroll in a program which can get you 5 or 6 business credit cards, which you are the personal guarantor.  You can advance the entire amount and pay back the minimum each month often o% interest 6 months to a year.  You then just transfer the funds to another card and start the process all over again.  Use the advance funds as down payment using a Non-QM loan.

The advantages of Non-QM loan would be that you can buy in a company or Trust name to protect you from liability, you don't have to submit any pay stubs, tax returns; they don't calculate your personal debt ratio; approval is made primarily on the asset's ability to generate income; you can combine all mortgage payments into ONE simple payment; you're never capped at how many properties you can own and often there's no Seasoning and Sourcing of Down Payment.  In other words, they don't ask where it came from and how long you've add it (most don't at least). The drawback is that these loans are more expensive requiring 20% down payments; costing upfront 1-2 points maybe more; and slightly higher interest rates than conventional mortgages.  In my opinion its worth it if you plan on doing this full time or at least draw a significant amount of income from it.

There you have it.  I'll PM you if you want to discuss further!

Robert, the answer will always be "It depends."  It always depends on numerous factors.  Consider the following:

1-401K funds is always a great source given the low interest payback.

2-How much are you talking about taking out versus prices of homes you looking to either by and flip or buy and hold (rent)

3-Do it NOW is always best if you have done your due diligence, considered all your options and feel safe enough to wade into investing.

4-The answer is NO if you haven't seriously focused on real estate investing.  You can't haphazardly jump into this arena.  If you haven't  dedicated man hours reading articles, books, watching videos, doing scenarios on Bigger Pockets calculators, reading through forums, made sure your credit and liquidity is on point, then again the answer is a resounding NO

5-If the answer is yes, then consider your exit strategie and tenant screening strategies.  

6-First time out you may consider Section 8 tenants who your Property Management company thoroughly screened.

7-For Fix and Flip consider small properties in not as "hot" areas so you don't blow all your funds on a flip gone bad.

8-Finally, if you wait until 2020 and combine your funds together to buy more real estate, GREAT but just remember if you still hadn't dedicated serious man hours reading, watching and analyzing deals, then you're going to be ill pre-prepared come 2020. You're just lose more money!

If the credit/loan is established in your LLC's name then it should not be reported as a debt/liability or obligation on your personal credit. The only time that happens is when you start to defaulting on the LLC's mortgage. Then its reported everywhere on both your personal and business credit. In fact your new Lender will tell you if its an issue when they run your credit again and they see it. But it shouldn't be there.

Looking for strong recommendations for Mobile based Property Management firms and Contracts (minor work and extensive).  Just getting my ducks in a row in building a team.  Also feel free to tell me your horror stories to guide me in the right direction of who to choose and not to choose.

Originally posted by @Matt Pastier:

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $36,000

This was my second deal as an investor. This was my first BRRRR and put me on the path to multifamily properties. I finished this deal around May of his year. We put new tenants in that we screened ourselves and it's worked out great.

What made you interested in investing in this type of deal?

My first deal was a SFR, but I knew I wanted to move into multifamily. When I found this property I knew I was going to have to use more tools to make it work, and realized I had found my first BRRRR opportunity. This was the catalyst for my next two multifamily deals.

How did you find this deal and how did you negotiate it?

It had been sitting on the MLS for months. It had tenants but needed lots of work. They were asking $70k. I offered $30k. We landed at $37k. BUT - the contract was not signed that day, and the next day he decided he wanted $47k. I walked away. Almost 4 months later we heard he was really itching to sell, so we offered $37k contingent on the property being vacant at closing and got the deal done. After a mistake by title, we ended up with a final price of $36k.

How did you finance this deal?

I borrowed from my 401k to buy it cash with some extra for rehab.

How did you add value to the deal?

We rehabbed the interior of both units. We did new paint, 20 year warrantied commercial vinyl plank flooring, new counters, painted cabinets, new appliances, new light fixtures, painted the basement, among others. We also ended up having to repair the 2nd floor balcony, plumbing, electrical, and a few other unexpected items.

What was the outcome?

The building appraised for $88,000! I ran my numbers based on a $70k appraisal to be safe, so needless to say I was pleasantly surprised. It still cash flows over $200 per door, and I got all my money back plus an extra $10,000. I have none of my own money left in the deal and this put me on the path to buying more multifamily.

Lessons learned? Challenges?

Yes, my biggest mistake was not getting a signed contract immediately. The realtors planned on it happening the next morning. If he had signed the contract that night, we would have had ended up in the same place (just 4 months sooner!).

Congratulations how much are you charging for rent