All Forum Posts by: Nick Ferrari

Does anyone have any experience Online Brokerages and which ones are the best to work with? There are many out there with different offerings and I’m not sure which one to choose from.

@Marc Winter mind if I PM you with a couple more questions? You seem to know what you’re talking about!

I own several investment properties but I have not tried a BRRRR yet. I have a 100K HELOC I also have additional cash set aside my question to all of you is:

Is it better to do a BRRR all cash purchase and then get a mortgage for that property? Or is it better to buy a home, finance it with a mortgage, fix it up, and then refinance after all of the repairs have been done? In addition to this what are the pros and cons to both methods. I have seen several people buy entirely cash that are cheap but most of the homes in the areas I invest aren't that inexpensive and I don't have enough funds to buy a home entirely cash. Anything under 100K is generally not the type of investment i'm targeting. Appreciate any help you can give. Thank you!

Yes a HELOC is factored in as debt to you personally but with that being said you should be fine. The industry standard for most mortgage companies is not allowing an individuals DTI exceed 43% and that's for the approval of a conventional loan. So if you have no debt at all you should be fine. Even then it all 'depends' on your situation for example how is it possible that some people own hundreds of properties wouldn't that create a massive amount of debt for the individual and not allow them to borrow any longer? Well your relationship with your lender can go a long way, if you have a proven track record of success and continue to finance your mortgages with them every time you do that you're building more assets with them and putting more and more money in their pockets so they make look the other way in the future at your DTI if you can execute on your end.

@Curtis Brown

Apologies for the late response this one got lost in the weeds. You do raise a fair point in that banks don't allow you to borrow against 100% some do 80% some allow up to 90% (typically leveraged at a slightly higher interest rate) so you could mark that in the cons of the HELOC column. I suppose you would have to look at it holistically for your own personal situation and weigh the pros and cons. For what i'm trying to accomplish the pros far outweigh the cons and I think that if you're using the investment strategy mentioned prior that would be true for most people but just because it works for me doesn't mean it works for everyone.

To answer your question regarding getting your money back on the BRRRR ask yourself this, would that not be the same situation if all of your money was sitting in a checking account and then your ARV didn't appraise well? A HELOC is simply a method of financing which is one of many components to a successful investment strategy for RE.

Let's say you're afraid of getting stuck with the interest well almost assuredly overtime you will make some money on the property even if it's not the greatest investment property you'll probably get some cash flow out of it which overtime will replace your initial capital investment or if it truly is a terrible investment you could sell it to get out of that situation.  I think it's important note that you're starting to play the "What If" card which is a slippery slope of negativity.  I could give you thousands of examples of what could go wrong and all of them could happen.  

My goal here is to explain the benefits of an underlooked investment strategy that has a bad name but what I believe is an effective form of financing for deals.  Certainly do whatever you think works best for your business though.

@Christopher Stacy

Wells Fargo does Heloc's on investment properties but one important thing to note because of the fact that it's an investment property the terms are not favorable they only offer 60% 10 year. If you have a ton of equity in your investment property then it might work out but terms are always tougher on a HELOC that's an investment property. Good luck.

@Mark Navarrete

I’m a firm believer if the opportunities are everywhere you have 250,000 people that live in Buffalo that’s a lot of homes. I think the bigger question is does Buffalo the type of market that aligns with your goals as an investor.

@Kevin Wilson congratulations! Excellent success story.

I disagree with Jaysen Medhurst.  I have done exactly what you described and have had a great experience with it i'll give you the bullet points as to why I agree with your philosophy.

1.) You are paying down a significant amount of interest in terms of dollars over the life term of your loan.  So if you're paying 64K against the principal and subtracting 30K in interest that's a significant savings when looking at it holistically. 

2.) You are shortening the lifeterm of your primary mortgage which for most average Americans is the largest expense we pay for so you have a higher chance of fast tracking yourself to retirement or financial freedom.

3.) You are creating your own financial instrument by leveraging your home with a HELOC. Now it is true there are risks like a recession the bank could close a line of credit. However that's being stated by the writer above almost as an inevitability and for the rest of time. The reality is there are many banks offering HELOC's that you could switch to if this were to happen and in a worst case scenario wait it out a few years and then try again. After all there's no reason why you couldn't try again... it's your primary mortgage were talking about it's not going anywhere and neither are HELOC's.

4.) HELOC's generally speaking are a very cheap form of capital. Most HELOC's are around the 4-5% Variable rate (currently) and historically are below 8% with only a few points in the last 50 years going above that and with a coming recession generally speaking interest rates typically go down and if you're worth your salt as your investor literally one homes profit in a given year could pay for any interest accumulated.

5.) If you believe in Robert Kiyosaki's principals of converting liabilities into assets then simply put paying down your mortgages principal and converting that into your small businesses bank account with a HELOC is in theory converting a liability into an asset.

It's very easy for people to simply say no that's a terrible idea we for some reason have this terrible stygma associated with paying down principal and then leveraging that equity to your own advantage, personally i've never understood why I think it's a brilliant move one that I can tell you has worked extremely well for me.

I'll leave you with item to ponder on.  Tell me, what risk do you have by paying down your principal (debt)?

Baby steps, get a deal that will get your feet wet mold for an extended period of time is tough.  You can treat it if it's on certain surfaces with a spray but my guess is you're dealing with something much more serious then that if it's been uninhabited for a couple years.  

More importantly it's not just the mold that's the issue you have to fix what caused the mold.  Is that structural damage?  Bad plumbing?  Roof damaged.  All three of those things are very expensive.  Depending on where it's at you may need to rip out the drywall and drywall work is an art you'll get quotes from cheap guys who learned how to spackle a couple weeks ago and your walls will look uneven and a mess and then you'll get quotes from guys who know what they're doing.  To put it simply this is not easy work that you can do like painting or learning how to install an outlet.  Mold is difficult and the other things related to mold are also difficult and if you're a newbie you don't know who the good contractors are from the bad ones and you don't know what to expect in terms of cost.  

By the way we haven't even mentioned that you have other expenses going into the house other than mold.  Don't buy unless you're certain this things a sure fire winner.