All Forum Posts by: John Lewis

I'm looking for a little help with my next potential deal. Here's the numbers. Purchase price will be $60k with an ARV of $115k. Rehab costs will run $20-$25k. I currently have a HELOC for $33k on my former primary residence which is now an investment property. The home has $100k in equity so my first choice was to just expand that line of credit which would give me enough for purchase and rehab and then I could do a cash out refinance on the new property and pay off the HELOC. Sounds easy enough but the bank doesn't want to play along since this is now an investment property. That being said I have a couple more options.

Option #1: Do a cash out refinance on the property with $100k (property #1) and I would be left with the $60k needed for purchase but nothing for rehab and I don't have enough cash to handle this so I'd have to rely on 0% interest credit cards, some cash, and maybe some other type of line or credit or loan with a higher interest rate.  The upside to this is I'm currently locked into a 30 year 6% interest loan and the new loan would be a 15 year 3.5% so my monthly payment would only be about $300 more and I'd get the second property and I'd have a 15 year loan.  Bad part is I lose my $33k line of credit which could be used in the future and I wouldn't have immediate funds for rehab.  I'm also not crazy about owing twice as much on this property because I have some tax benefits if I sell it within 3 years since it was my primary residence.  Not a huge deal because I probably won't be selling it.

Option #2: Use the $33k HELOC I currently have and get an additional business line of credit or hard money load at a higher interest rate. Purchase the property and complete the rehab and then refinance the new property to pay off rehab costs. At this point I have the choice to refinance property #1 with a lower interest rate and I have the two properties separate of each other. The bad side to this would be higher interest during the rehab phase and more potentially more closing costs since I'll be refinancing two properties.

Since this is my first time having to get a little creative on financing I just want to make sure I don't set my self up for failure.  

Welcome to the internet @Malcolm Darensbourg!  I'm also out in Laplace so let me know if there's anything I can do for ya.  @Braden Smith I just joined NOREIA so maybe I'll see you at some of the meetings.  I wanted to go tonight for the mastermind group meeting but something came up.

Yeah the deal did include rent being taken off but he asked for half upfront in cash to pay his crew and buy materials. Never saw the crew or most of the materials.

Talk about a double whammy! I recently started renting out a property to a so called contractor.  We agreed on him doing some work on one of my other units and I've paid him $8,100 so far for a job that was supposed to take 10 days is going on 2 months.  Not only that but he has told me that he can't come up with the rent for this month.  Looks like I'll be handing out my first eviction but I'm not sure what I can do to recoup the money I've paid him for the incomplete work plus whatever it takes to get the job completed.  Has anyone had any success actually collecting money from a contractor in small claims court?

Welcome to the forum! I'm in LaPlace.  I'm a newbie too I guess you could say.  I have a couple rentals now and this site has helped tremendously.  I really get a lot out of the podcasts so if you haven't started checking those out I highly recommend it.  Also, not sure if you know about it or not but there is a Real Estate Investors Association that meets every month in Metairie.  I've been meaning to catch one of their meetings.

Wow! Thanks for all that info! I can definitely implement some of that. I currently only have two rentals but love seeing how you were able to scale this up. Good stuff!

yeah I've been using craigslist to advertise but would like to get some contacts at these companies that handle lodging.

So I see a good bit of people talking about corporate housing and short term rentals but is anyone focused on blue collar workers coming in town for construction type jobs?  I've been focusing on this lately and it's been working out well.  We have a lot of refineries in the area so they have a good bit of workers coming in regularly for construction and turnarounds.  The motels fill up and many would prefer a house with washer, dryer, kitchen, etc.  I've been trying to offer everything the extended stays and some for the same price or in some cases lower.  They are usually being paid per diem and are here for a couple months at a time.  So far this strategy is working well for me.  Anyone else doing something similar?

I should have included that info.  I have owned the home for 6 years as my primary residence so would have a tax exemption.  I think I would have a hard time finding a better cash flowing property.  Repairs have been pretty frequent but I'm at the point where the home is almost completely rehabbed.  The good thing about options is I can always try renting out both units and if it's not working out I could sell and if it is I could use the line of credit.  

I know there have been many discussions on this topic but looking to see what advice you guys have for my unique situation.  I'll try to include as much info as possible.  My current home was purchased for $56k with $45k owed.  I've slowly rehabbed it over the last 5 years and recently had it appraised for $130k.  I have a mother in law apartment behind the house that I currently rent for $900 per month which has paid for most of the repairs on the home so I'm not going to include those costs in the scenario.  I'm in the process of purchasing a new home and have a decision to make.  Do I rent the main house (Average rent is $1300/month plus the $900 for the apartment) or sell the home for $130k?  The home is in a suburb of New Orleans that is pretty stagnant and I don't expect home values to rise much.  The other issue is it may be difficult to keep both units rented.  My main goal is to gain financial independence with cash flowing properties which is why I'm so torn on this decision.  This property produces excellent cash flow but selling could give me some much needed capital for other investments.  The other option would be leveraging the equity in the home.  I have plenty of options and I like having options but I'd like to hear your opinions on the best method to reach my goals.  I know everyone has a different opinion but my main question is for a guy who is trying to break into investing is it more important to have a little cash flow or build up some capital?