All Forum Posts by: Patricia Taveras

@Tucker Cummings

Hi Tucker. Can you take a loan out from your 401k? I have been able to take 50% of my 401k funds out in the form of a loan three different times to help me make down payments on property. There were no tax penalties or implications doing it that way. Then I have paid back those loans through payroll deductions. I don't know if all 401k plans have that option, though, or if it's something you're open to.

Hey Jack.  Yes, it's ALL about the numbers.  I had actually approached that same lender about 6 years prior to ask if he would fund a house that needs work to in order to flip.  He said yes, but that he had specific credit requirements of the person he leant to.  He explained the debt-to-income ratio he was looking for and how to make a list of my liabilities and assets to see if I had any sort of net worth (at the time I did not.)  I wrote all that down.  Years later when I was really ready to do something, I was able to approach him again, and brought him all the documentation he needed to see that I met his requirements.  I brought him 2 years worth of tax returns, my mortgage statement and information on my home to prove what it was really worth so I could show I had significant equity, signed leases on my two rental properties, and statements from every bank account and credit card account I had in my name.  I brought him county tax information on the home I wanted to buy along with a spreadsheet of what I would earn through renting it long term.  It made his job easy.

The differences between the commercial loan and residential:  

The downside: the commercial loan has a higher interest rate.  It is a 15 year loan.  It has a balloon due after the first 5 years, which my lender already said if I pay regularly he will be willing to refinance.  But that means the interest rate will be subject to change.  The original plan was I was going to refinance to a residential loan when I thought I would do a LTR.  But when I changed strategies to Airbnb, I had to keep the commercial loan.   

The upside:  I was able to set up a loan through which I did construction draws to fix up the first property and finance the repairs.  Being a small local lender, I was able to purchase the second property with NO down payment, because I had so much equity on the first investment property, it was my lender who suggested he could use the equity in my first property to account for the down payment on the second property, allowing my to close with very little money out of my own pocket.  He was also able to use a mere 3 months of Airbnb numbers to make some projections for the second house to push the loan through. And, I'm making money!

@Jason Muth

Hi Jason. I have three Airbnb's in New Bern NC, 35 miles from the beach. Business barely slowed in the beginning of Covid. We had a lot of cancellations followed by rebooking. Now, we are back to very few cancellations and great business. We actually closed on our third Airbnb early April. Side note - I don't understand why hosts are strict on their cancellation policies. We have always had a flexible cancellation policy and it hasn't hurt us yet. Someone else always books! And it feels good to work with people! Anyway, 2021 is already off to a great start, even though January is typically a slower month.

@Jack Rozema

Hi Jack. I used a small local bank to fund my Airbnb properties. I was able to get commercial loans for them. I already had more than 2 years experience with long term rentals, so I was able to finance my first Airbnb with projected numbers as if it were going to be a LTR (yes my numbers would have worked for that too.) I bought my second Airbnb the same year, and my lender was willing to look at my Airbnb numbers from the first house to make some projections for the second house. This local bank was willing to work with me in ways other banks would not have.

@William Kaniho

Hi William. Congratulations on your first deal!

@Nicholas Grandstaff

Hi Nicholas. I have used 401k loans to purchase three properties and would do so again in a heart beat if I were able, but our 401k administrator recently put a limit in loans by requiring the loans be 5 years apart, which disappoints me. My real estate investments are my retirement plan. I plan on purchasing homes until the cash flow allows me to stop working a w2 job. Leaving my money in a 401k wont do that. And once I retire, if I live off saved up 401k money, I use it up until it's gone. The houses most likely won't stop paying me as long as I take care of them and screen tenants well. I would talk about appreciation as well if two of them weren't mobile homes. But the two mobile homes cash flow great. And I have a ton of equity in the house I purchased and fixed up with some help from a 401k loan. I have since bought three more houses without any 401k loan, yes the kind that will appreciate, and the equity in those is worth more than my 401k has ever been worth! So for me, using the 401k loan to get started was an awesome tool. Real estate is work, though, so make sure you are up for it. I love it - even the hard parts. Good luck with whatever you decide!

@Mike Harris

Hi Mike. Look into Host Financial. They were offering 10% down loans pre-covid. When Covid hit, however, their investors got spooked, and some of that was put on hold. I had reached out to them about financing around that time, and ended up going a different direction. But maybe they're back? Or offering that again? Good luck!

@John B.

Hi John. I agree with everything Jon said, plus Ali makes a great point about knowing your local regulations and knowing that it's a possibility that Airbnb's could be banned in the future in your area even if legal now.

That being said, I love my three Airbnb's! To mitigate the risk of a future ban I evaluated these purchases through the lens of a long term rental. Numbers have to work there in case I need to pivot. These homes would also sell easily, and for a profit, if I needed.

Airbnb in my area has been strong through Covid. But that hasn't been true for all areas. So do your research.

I have higher expenses than a LTR, but higher cash flow, too.

Pro - Our cleaner is inside the property very regularly so small issues get fixed before they turn big.

Pro - We self manage easily because we live in the neighborhood.

Pro - Bad guests are out quickly! Lol! Truth be told, most of our guests are great!

Good luck with whatever you do!

@Alex Lien

Hi Alex. I have two mobile homes I rent out because that's how I got started. One is on a rented lot. I pay the 100/mo lot rent. My tenant pays me 575/mo. I paid 10,000 for this home in 2009. It was my primary residence for a few years until I bought my first house. The first home I bought as a rental was a double wide I paid 15,000 for. I moved purchased a lot for it and put it on a permanent foundation and titled it as real property. I am all in on this property for 44,000 and rent it out for 800/mo. Screening tenants is key. Buying the homes is different than buying a house because they are titled through the DMV in NC. Now I have moved on to buying three bed 2 bath houses that I rent on Airbnb, but the mobile homes were a good way to get some cash flow started and some experience. I like buying houses better because of the equity, the appreciation, and the knowledge I could sell them easily if I needed to. But I appreciate the mobile homes too. Good luck with whatever you do!

@Alex Donley

Hi Alex. My husband and I purchase most of our furnishings and kitchen wares from Facebook marketplace, yard sales, and thrift stores. You can buy good quality items cheap. We usually buy new sofas and loveseat however. We purchase all linens and towels new. Cotton polyester blends are great for sheets. We fully encase all mattresses, box springs, and pillows with bed bug proof encasements from Amazon. We buy new TCL Roku TVs at Walmart. Once you furnish it spend a night in the house. That will help you figure out what might be missing. Good luck!