All Forum Posts by: Jonathan Pflueger

Where are you located? 

@Albert Massop

Welcome to the BP community! Start devouring all the real estate knowledge you can, be greedy for it! Read books, attend meetups, listen to podcasts, and talk to anyone that knows more about real estate that you do. 

Adopt a servants mindset. Always try to give more than you get and be willing to do the things others will not!

But really, explore BP. The site has some amazing podcasts, especially the early episodes of the "Real Estate BiggerPockets Podcast." The newer ones are good too, but the older ones with Dorkin and Turner are the best and most authentic. 

@Nicholas Wever

Great questions and not silly at all. Let's get down to it. 

Transitioning from sellr financing to traditional financing on commercial properties, the initial down payment made during the seller financing phase is taken into consideration when calculating the equity you have in the property (make sense?). This is key to understanding how refinancing works and how you might not need to come up with additional cash for the down payment (this is the power of real estate over time!!!).

For the properties you've acquired at $350K each with a $50K down payment and seller financing at 6%, you've already built equity equivalent to your down payments plus any principal payments made since closing. Assuming the property value has remained stable or appreciated, when you refinance, the lender will assess the current loan-to-value ratio (LTV) based on a new appraisal. If the LTV is within the lnder's acceptable range, typically 75%-80% for commercial properties, the equity you've already built can satisfy the down payment requirement for the new loan.

For example, if your property is appraised at $350K at the time of refinancing and the lender requires a 10% down payment ($35K), your existing equity ($50K down payment plus any principal reduction) would more than cover this, eliminating the need for additional cash outlay. The new loan at a 5% interest rate would then pay off the seller's remaining balance, effectively transitioning your financing without additional down payment.

It's also worth noting that some lenders might allow a "cash-out" refinance, where you could potentially take out more than the existing loan balance, given enough equity in the property, which could be used for further investments or improvements. However, the terms and feasibility of this would depend on the lender's policies, the property's cash flow, and your creditworthiness.

In your situation, considering the looming deadlines and financial pressures, the following options could provide some assistance and get your through:

1. Hard Money Loan: Taking a hard money loan could be a viable stopgap measure to tide you over until you can sell your property or until your financial situation stabilizes. Hard money lenders typically focus on the property's value rather than the borrower's creditworthiness, which could be beneficial given your current Chapter 13 bankruptcy status. These loans can be arranged quickly, providing rapid access to funds. However, be mindful of the higher interest rates and fees associated with hard money loans compared to traditional financing. It's crucial to ensure that the terms are manageable and that this approach doesn't jeopardize your financial recovery plan.

2. Mortgage Forbearance: If you're in California and your area has been declared a national disaster zone, you may qualify for mortgage forbearance. This could temporarily reduce or pause your mortgage payments, providing significant relief. It's important to contact your lender directly to discuss this option and understand the terms, such as how the missed payments will be addressed once the forbearance period ends. Forbearance can offer breathing room without negatively impacting your credit score, but it's essential to have a clear plan for resuming payments.

3. Just Don’t pay your Mortgage?: Some may not like this option, but…. In most states the act of foreclosure is a long process (6 months or more). If you only need to make it 3-6 months this may be an option worth taking. It does have some consequences so research it and be very aware before you make this move. You should also try reaching out to your mortgage company and simply tell them the situation and see if they can help, sort of in line with option 2.

Best of luck in a very stressful and hard situation.

@April Birdsong

Home inspections almost always bring surprises, like the plumbing and attic fire remnants you've encountered. Here’s how I see it and a possible plan of action:

Plumbing Concerns:

- The Good: New plumbing inside the house is a thumbs-up. It shows that part of the system is updated and likely to be reliable.

- The Caution: Rusted cast-iron pipes outside are a potential headache. These could lead to leaks or blockages, requiring costly repairs or replacements down the line. I have dealt with this before and I almost always end up ripping them out and replacing.

Action Steps:

1. Get a Plumber: Have a professional plumber assess the condition of those outdoor pipes. They can provide a clearer picture of what you're dealing with and potential costs.

2. Seek Multiple Quotes: Don't settle for the first estimate. Get a few different professionals to take a look so you can compare advice and costs.

Attic Fire Aftermath:

- Visible Damage: Seeing the aftermath of a fire in the attic is a red flag. It's essential to understand the extent of the damage and the quality of the repairs.

- Structural Integrity: The main concern is whether the fire compromised the house's structure and whether repairs were cosmetic or structural.

Action Steps:

1. Consult a Specialist: A structural engineer or a contractor experienced in fire restoration can assess the damage and the quality of the repairs.

2. Detailed Inspection Report: Ensure you get a comprehensive report that outlines what needs to be fixed, if anything.

Gathering More Information:

- Talk to the Seller: Understanding the history of the repairs and any challenges they faced can provide valuable context.

- Review Historical Permits: Check with local building authorities to see if the previous owner obtained the necessary permits for the repairs. This can also indicate the work's legality and thoroughness. VERY IMPORTANT STEP!!!

- Community Insights: Sometimes, neighbors or local real estate professionals can offer background information about the property's history and any significant incidents. Before I buy any property I always door know the neighbors and see what they can tell me about the properties history. You will be amazed at what you can learn. 

This may look and feel like an impossible list, but it is not. Start working through the items one at a time and you will see it is not really that hard or impossible. This is the type of work that sets the pros apart from the novices. Due diligence is so incredibly important. You make your money when you buy, end of story.

Best of luck!

@Lawrence Adair

Diving into your first owner-financed deal in San Antonio sounds exciting! One of the cool things about owner financing is it's usually more straightforward than dealing with banks. You might get to call the shots on your down payment and how you pay back the loan, which is pretty handy. Plus, it's faster and might save you some cash on those pesky fees that banks love to charge.

AAN Don't forget to cover your bases. Chat with a real estate pro to make sure everything's on the up and up, especially the contract details. I have done many owner finned deals and for all of them I used a real estate agent, mainly for their great contract and E&O insurance (I like using an agent but you definitely do not have to).

Do a deep dive on the property too, checking it's all clear to sell and there aren't any hidden surprises. And maybe think about using an escrow account for the payments; it's like having a referee for your money, making sure everything goes where it's supposed to.

Super excited for you, best of luck!!

@Rodrigo Barreiro Pujol

Your plan to house hack in Austin with a $25k initial investment is a solid start. Given Austin's competitive market, ensure your savings align with down payment requirements and closing costs for multifamily properties. Consider FHA loans for lower down payments, but remember, the key is to find properties where the rental income covers your mortgage and expenses, ensuring positive cash flow (although in Austin is will be hard, but not impossible, to accomplish)

Aiming for five properties in five years is very ambitious but achievable with the right strategy. As you gain experience and build equity, explore leveraging your existing properties to finance additional purchases. This might mean refinancing or using a HELOC (Home Equity Line of Credit) to access capital for your next investment. You may also want to really consider trying to find an experienced partner after you have done a deal or two - this may be key to helping you reach your five year goal.

Lastly, always keep a close eye on your numbers. Factor in all costs, including maintenance, vacancy rates, and property management (if you choose not to self-manage). Each property should not only be as self-sustaining as possible but also, ideally, contribute to your income. As you grow your portfolio, consider diversifying your investment locations and property types to mitigate risks.

@Mike K.

Yes I agree. And because of that type of mentality by the county you can expect home prices to rise even more. It is unfortunate. 

@Kevin S.

As real estate investors, we constantly weigh the pros and cons of different investment strategies, including the decision between a larger or smaller down payment on rental properties (I prefer smaller anytime I can). Let's consider what the lender suggests where puting 20% down on a $400,000 SFH results in a $500 monthly negative cash flow, while a 40% down payment would break even (even that is subjective to how you calculate breaking even but the is another post in and of itself).

Positives from an investor's perspective:

- Leverage and Appreciation: By opting for a 20% down payment, I'm leveraging my capital. If the property appreciates at the expected 5% annually (a reasonable assumption in many parts of Florida), that's a $20,000 increase in value on a $400,000 property. My effective return on the additional $80,000 (if not used for a larger down payment) could be substantial if invested in another property.

- Expansion: Using the saved capital to invest in another property can potentially double my investment opportunities, diversifying my portfolio and increasing my chances for additional income and appreciation.

Negatives from an investor's perspective:

- Cash Flow Concerns: The $500 monthly negative cash flow translates to $6,000 annually, a significant amount that needs to be managed carefully. This strategy requires a solid financial buffer to handle the negative cash flow and any unexpected expenses. Are you financially savvy or responsible enough to handle this?

- Market Volatility: Real estate markets are subject to fluctuations. Relying solely on property appreciation is risky. A downturn in the market could negate expected gains, impacting the overall investment strategy.

Additional Suggestion:

- Cash Reserves: Maintain strong cash reserves to cover the negative cash flow and any unforeseen expenses. This will ensure the investment remains viable during tough times.

As an investor, the decision to go for a smaller down payment and manage a negative cash flow hinges on my (your) ability to handle the financial strain and my (your) confidence in the property's appreciation and cash flow potential. It's a calculated risk that could lead to substantial gains but requires careful planning and risk management. All of this possible, what do you feel you are up for?