All Forum Posts by: Pearce G.

I'm doing this right now...refinancing a property I just closed on this month, tenants in place.  This house already has a closed in deck that was never recorded with the county, so I can add >20% to the square footage with only some paperwork and fees.  However, because I am refinancing within six months, I am limited to refinancing at my purchase price, regardless of where it appraises.

If I wait six months, I can make improvements and refi at a new appraisal value.

However, I was told there is a possible loophole. In my case, I own the house in an LLC. Theoretically, I could sell it to myself (or my wife) at a modest markup. Then refi within six months at the new sale price. Again, it would have to appraise at the new sale price.

Bounced it off my lender, and he said no...that kind of thing was a contributing factor to the housing crisis.  I'm already way down the road with him on this refi anyway, so I'm not going to explore it any further.  If I did, I would seek legal counsel.

Agree with @Ken P.  Don't cut it so close you can't sleep at night.

You may be able to get the 3-unit under contract with a contingency of selling your flip, but that will probably make your offer less competitive.

Otherwise, I would wait until you at least have your flip under contract (and have a more precise expectation of net proceeds) before going shopping again.

The 3-unit property is not a one-in-a-million opportunity that just happened to pop up right now.  Opportunities pop up all the time if you know how to recognize them, and it seems like you do.

Got it.  Thank you @Dmitriy Fomichenko. 

Would all the other "arms length" rules still apply after 59 1/2?  For example, would I still be prohibited from paying myself directly as the property manager?

I'm 56. If I purchase a property through a SD IRA, can I start drawing income from it at 59 1/2?

If breaking even on the front end is critical, these estimates don't leave much room for error.  Transaction costs will eat in to some of that 20K.

But do you have to break even from the start?  Let's say you're off by 50K.  Instead of being 20K ahead, you end up 30K in the hole after cash-out refinancing.  That's not necessarily bad.  If you're cash flowing just $500/mo after the rehab/refi/rent, that's still a 20% annual cash on cash return.

@Rick Turman

COC-ROI = (annual net cash flow) / (net investment amount)

I can't see all your numbers, but when you refinance, you reduce the bottom part of that equation...i.e. the net investment amount, or the amount of your own cash in the deal.  So you are dividing by a smaller number.

Using your example, if your total investment is $111,500, and your monthly net is $1122, your COC-ROI calculation before refinancing is (1122X12mo)/111500 = 12%. Not bad.

If you refinance 75% LTV at your ARV of $140,000, then you are cashing out $105,000. Now you have only $6,500 ($111,500 - $105,000) of your own money in the deal! That's your new net investment amount in the COC-ROI calculation.

So...even though the monthly P+I payment on the refi debt reduces your monthly net from $1122 to $590, your COC-ROI goes way up because you are dividing by a much smaller number: (590X12)/6500 = 109% Wow!

@Jason Timmerman

You made a compelling defense, but I'm stilled troubled by 

"I got pissed and initiated a bidding war with no intention of buying just to raise the price on the a-hole messing into my turf."

I didn't want to hijack another thread, but Allan Ramos' question  

https://www.biggerpockets.com/forums/616/topics/45...

reminded me of something I've been wondering about.  

One reason I have not pursued a RE license is because it requires affiliating with a broker.  I don't mind doing that as long as the broker understands I'm in it for my own RE investing objectives.  I may end up bringing new business other than my own transactions, but that would not be my main objective for getting the license, and I don't want to represent otherwise to the person sponsoring me.

Would the broker-in-charge assign other duties or have other expectations to make it worth his/her time?  Or is this just part of the business that a broker accepts? 

Most agents can set up an auto-email that sends you daily (or as often as you want) updates on properties that meet your criteria.

Hi @Buddy Holmes  Another 55+ late bloomer here with my 3rd and 4th properties under contract.  Let's meet for coffee sometime.