All Forum Posts by: Ryan Fox

Thanks @Ty Coutts! So the best thing to do would be to get an LLC with a business checking account to use for that property, plus get an umbrella insurance policy on the rental?

We are moving to another home that we have renovated, and will be renting out our primary residence on a long-term lease. The rents are good in this area, and it should cash flow well. I will be managing the property myself. We have rented houses before, but always used a management company. We are excited to try out property management for the first time on this home, but not sure if we should set up a business first. I am using the RentRedi software, and it suggested that we receive rents using a business checking account and not a personal bank account. So is forming an LLC and getting an EIN to set up a business checking account to receive the security deposit and collect rent payments a good idea? I have searched through the forums looking for an answer, and I have read that some people say getting an umbrella insurance policy is better. If so, what is the best type of insurance company to contact regarding that policy? And I also wasn't sure if it was a good idea to transfer the house into the LLC also once it was formed. I have read that in some instances, the mortgage company will use its due on sale clause, so that makes me a little hesitant. I have read other people's posts suggesting putting it in a trust? Any advice or suggestions for someone just starting out with property management would be greatly appreciated! Thank you!

I believe we are going to cancel on the cash out refi, and think more about doing a HELOC. That combined with the money we've saved should be able to put a down payment on maybe a multi family, since we could get more than one door. I still don't understand about the lending process...so if we buy one rental, we'll have to wait 2 years to be able to show that as income to get the next loan? Any help would be greatly appreciated. Really wanting to get started, but not sure the best route...

Quote from @Carlos Ptriawan:

basic rules:
leverage when inflation is low and interest-rate is low.
deleverage when inflation is high and interest rate is high.

Either HELOC or cash-out refi is a sort of leverage, when you HELOC/cash-out refi during interest rate > inflation and then do BRRR ; your risk is pretty much is 3x compare to an investor that's over-leveraging during low-interest rate/low inflation period. Be careful since it's your own money.

Thanks for the feedback! So does that mean that it's not a good time and it's riskier to borrow (cash out refi/heloc) cause interest rates and inflation are both high right now. We were hoping to get into investing soon cause we are anxious to get started, and because we are seeing the demand finally cooling off a little. I know interest rates are an issue for large amounts, but thought that since it's not for very much money that it wouldn't be a deal breaker. And if we did take out the cash and used BRRRR, how hard would it be to get the next cash out refi for the ARV of the next house and so on? We are mostly just unsure of the lending process, cause mentioned above that we have to have a rental for 2 years to use that as income on the next loan. Would we get stuck after first property cause of DTI? Any help would be greatly appreciated. I am reading every Bigger Pockets book I can get my hands on, and listening to all the podcasts, but have so much to learn still...

The lender said we could get $103k out on the cash out refi with a 6.5% rate on a 30 year fixed. That would add $1200 to our current mortgage per month. My biggest concern is that we would be limited to only the BRRRR strategy and buying a property only with cash. Because now the debt to income ratio has changed, I worry that we would not be able to use the money for down payments on rental properties. I am not sure if we could get financing on other properties that don't currently have tenants because our DTI is so stretched. Really not sure what to do? He explained again that a HELOC wouldn't make sense financially, at least for an amount of $100k. And the heloc would be closer to 12% interest rate

And I love the move in BRRRR strategy that was mentioned, but we are probably going to have to buy out of town cause the houses in my area aren't cash flowing. Thanks!

Hey thanks for your help! We refinanced over a year ago and got a 3.75% interest rate. It's a 30 year fixed. We owe $275k on it and have $175k in equity. The lender we talked to said the HELOC would be around 12%. He said that the low interest fixed and the high interest HELOC would end up being more than if we did a cash out refinance and had just one payment at around a 6% rate. And he said on the refinance we could take 80% of the home value. So is that 80% of the $175k equity, or 80% of the full value of $450k?

My wife and I are trying to get started with rental properties, but only have a little bit of capital. A lender we contacted suggested that we do a cash out refinance on our home. He said a HELOC would end up costing much more. For us to start out, should we do a cash out refinance on our primary residence and use the capital to brrrr strategy for a fixer upper...or possibly use the cash to make down payments on multiple rental properties?