All Forum Posts by: Patrick Young

@Brian Larson I do pretty much agree with you.  I wanted to make sure I wasn't missing anything. Funny my mortgage broker thinks this is a great idea:)

i think you are right selling would be better than refi. Perhaps next year I have enough equity to refi. 

@Chun Fai T. It would be about 4.4 years or little less to make back from the refi savings. Probably double that if you are just counting positive cash flow. I am currently negative cash flow. 

No PMI, got rid of that in 2011. Would be going from 5.25% to 4.375%

I am debating whether to refinance a rental property. The numbers might be obvious to others or it may be a matter of investing philosophy. I generally would not want to have to add equity to a property just to refinance. My rental  was purchased with 3% down as a primary about 6 years ago. It is a rental now and does not cash flow but is in a high appreciation area and A neighborhood so very worth it to keep. If I had put 25% down it probably cash flows or breaks even.

Here are the numbers

-Have about 20% equity and a 384K current loan balance

-Need to come up with 5% equity more

-Current PITI is $2,760

-Refinance at 4.375% with 25% equity would give me a PITI of $2,193

-Difference is $567 month less PITI

-The kicker, I would have to bring from 25-30K to the table to have enough equity. I am loathe to do this sacrificing purchasing another rental but, do the numbers make sense?

At $567 less a month, that is $6,804 a year which is between 22% and 27% depending how much I end up putting in.

On one hand I like that I am using the equity I built up, but do not like having to fork over that much extra cash. Am I simply Pre-paying for cash flow and fooling myself? It makes the rental much more attractive and I probably break even or make some. I am not looking for advice on whether this is a good cash flowing property (I know it is not). It is in an A neighborhood, yada yada yada.

Keith Anderson did you ever do a tour of Mack? I recently had a call with them and learned many of the similar things you mentioned. They sounded good. They quoted me PM of flat $95. They said they manage 1800 rentals not 1200 and like you said PM not a profit center. Also heard same on how they derive rent. They also say that tenants stay average 3.8 years. That sounds great but I am skeptical. However, looking at pro formas there is 0% vacancy and 0% maintence and cap ex. Basically this is a first year pro forma. And of course it looks great. I am on the fence with Chicago. The taxes on one property I looked at were over $400 for the month.

Keith Anderson did you ever do a tour of Mack? I recently had a call with them and learned many of the similar things you mentioned. They sounded good. They quoted me PM of flat $95. They said they manage 1800 rentals not 1200 and like you said PM not a profit center. Also heard same on how they derive rent. They also say that tenants stay average 3.8 years. That sounds great but I am skeptical. However, looking at pro formas there is 0% vacancy and 0% maintence and cap ex. Basically this is a first year pro forma. And of course it looks great. I am on the fence with Chicago. The taxes on one property I looked at were over $400 for the month.

@Matt Motil that is what I am thinking. I dont want to leave any dollars not working for me. Though I also do not want to run too thin. Alot is timing. Its hard to find a deal these days, but not very hard to lend out. Do you sit your cash idle and find a rental deal or just lend it out, but then it is tied up for a bit. I could keep enough on the sideline for modest down payments.

@Curtis Yoder yes first position. I think I would only do this for flips with a very experienced person, get the money back and use it again. Then I get back to my original thought, do I lend in right back out or use the money for SFH rentals. The market and my mindset will probably tell me. I have about 6 months before this happens.

I recently lent money as a private lender for the first time. My original focus was to acquire rentals. The process of getting to know the market and just finding a deal within my limited time led me to get in the game by lending. I have lent pretty much my entire allocated RE budget on this project. It's 110k 12% on a rehab with a local experienced flipper. I did it to look over his shoulder and make money. I really like the idea of lending and would love to do it more. If I had a million dollars that's all I would do. Frankly my 110k won't move the needle far enough. I would like to continue acquiring rental assets (have 2 now). I know people lend and buy properties all the time. These people probably have way more idle cash than me. How feasible or smart would it be to keep lending after this deal while buying rentals? I would have to borrow to buy, which is ironic. I guess it comes down to simple arbitrage in the end. Can I use my lender note as collateral to get a bank loan? I realize nobody really knows my specific financial situation so hard to give advice but has anyone else been in similar situation? Am I burning it too close? Do I need to focus more? I really want to pursue both but not sure if one should be mastered first.

It's a bit risky but his principle pay down is probably 3 times his monthly loss. If he can hold for 30 years he is doing well. Has to have money obviously from a job or other investments to absorb the loss. Not sure what the plan was to hold until retirement or if rapid appreciation was goal. If he planned to get out in 10 years I would be nervous. Lots of factors that we don't know about in his situation. If he had other profitable REI investments this could offset those profits for tax reasons.

Tarik Larue just reading through this and curious what ended up happening. Hope you pulled it off!