All Forum Posts by: Nick Wilkinson

Thanks for the valuable insight @Account Closed

@Michael P. They said they would be willing to finance 100% with a 20 year am and 4.375% interest rate fixed for 5 years.

The current 100% financed loan is a 30 year am.

@Sudhanshu Singha If that is the case, then both of these rules would be satisfied. I purchased the property for $169k (monthly rent is $1700) and my cash flow is about $400/month (400*12=$4800 per year). As far as the loan goes, it is not a balloon loan but, unfortunately, it is only fixed for 5 years. I have spoken to the bank extensively about getting a fixed rate but they are unable to do it as of now. They did say that once I am able to get at least 5 properties we would be able to rap all of the mortgages together and do a long-term fixed rate. 

@Brian G. Thanks for jumping in. Yes, this makes sense. So if I was purchasing these properties with 100% financing but buying them below market value, would you consider that to be liquidity? Then if something happened I still have the ability to sell at the true value without completely losing my shirt. Also, I would do some work to the property in order to force some appreciation.

@Curtis Bidwell Thanks for the advice. So what your saying is as long as I am buying deals below market value that I know I can increase the value of (through rent increases or physical improvements) I should keep utilizing the financing?

@Ryan Howell Thanks, Ryan. How I see it, if I am able to find a property for $150K (and finance 100% of the purchase) and I know it is worth $180k after putting in a little work and raising rents, I am basically already doing the BRRRR strategy. The only difference would be that I don't have the opportunity to recoup my investment for the repairs like I would in the BRRRR strategy, although it can be difficult to achieve that anyway. Additionally, by financing at the $150k as opposed to the $180k my payments would be lower and cash flow would be higher.

@Dennis Cosgrave Hello Dennis. My reserves are certainly something that I should focus on more. I can't say that I have enough reserves to buy 5 properties at 100% LTV in the next year. Moving forward this is something I will consider before purchasing a deal using 100% financing. The 2 loans I currently have are 30 years but only fixed for 5 years. They are not balloons so I don't have to worry about a refinance in 5 years but I will likely see my interest rate go up. Like I mentioned previously, the bank has also said once I get 5+ properties they would want to combine the loans to get a long term fixed rate and amortization.

@Whitney Hutten Hi Whitney, glad you hopped in. Currently, they are lending on 100% of the purchase price. I have not thought about the possibility to have them loan on the purchase and rehab. This would allow me to create some equity without any cash investment while still keeping my payments relatively low and cash flow high. Maybe this is something I will talk to them about. This is why I almost like this strategy better than the BRRRR because instead of buying cash, creating value, then doing a cash-out refinance at a higher value (loan payments are higher), I never have to put my money in and my payments remain lower because the financing was given at the lower property value.

@Dean-Ross Schessler Thanks for hopping in on the topic. Yes, we have been pretty lucky in Nebraska as the pandemic has been fairly mild compared to other parts of the country. As far as I know, most investors have done well with their long term rentals over the last few months. I will say, as far as cash flow goes the numbers here are a lot different than they are in California (fundamentals remain the same.) The duplex that cash flows $400 was purchased for $169k and rents are $850 per side. Can you give me an example of what 2 times the monthly gross rent revenue would be?

@Tyler Weaver What if I am buying the properties for below market value and adding a little forced appreciation? Then would it make since? This way I have some equity from the initial purchase and add some more forced appreciation with improvements.

@Alvin Sylvain Although it has no equity to begin with, my plan is to hold the properties long term so I don’t think the equity piece is much of an issue. I will grow equity through improvements and principle pay down. The only real threat would be if the market gets so bad that tenants are unable to pay rent and/or rentals rates fall to where it does not cover my payments.

@Percy Matsunaga I’m investing in the Lincoln, Nebraska market. I’m a commercial real estate agent here as well.

Hello all,

I am currently the owner of 2 duplexes, 1 conversion and 1 side-by-side. The conversion was purchased using a down payment of 20% and cash flows $525/m. The side-by-side was purchased 100% LTV (zero percent down) and cash flows about $400/m. Obviously, this means my cash-on-cash return is infinity but I started with zero equity in the property and have to build it over the long term. The bank was willing to loan me 100% of the property value because my dad has built a very good relationship with them over the last 20 years through his construction business. I recently spoke to the loan officer and he said he would be willing to do this again.

Should I keep taking advantage of the 100% LTV and low-interest rates or is this "over-leveraging" too risky? Any advice would be appreciated.