All Forum Posts by: Randall Alan

Typically you have to leave 25% equity in the property.  So if you had a $100,000 house free and clear, the lender would loan $75,000.  If you owed $60,000 on it, the lender would loan you the difference between what you owned on it, and the $75,000... so $15,000.

If you are doing a cash-out refinance this will reset the amortization on your mortgage... so if you were say 10 years in, you would have made a lot of progress and be paying down way more principal per month than in year one.  So you would give that up if you do a cash-out refi.

Another option would be to do a Home Equity Loan or Home Equity Line of Credit.  This is essentially a second mortgage, so doesn't mess up your progress on your primary mortgage.

As for opinions... it depends on your objectives.  If you see yourself owning that home and paying off your mortgage, it's a bad idea.  You just moved the goal post further away.  If you see the money as an opportunity to make money (ie. a positive cash flow opportunity like you read about on BP) it is probably worth it.  Don't refi and buy stupid stuff or take a trip on it... that would be the dumb thing to do. 

All the best!

Randy

I also have another suggestion for you... and this is going to depend on what level you run your rentals at.  We don't do high-end rentals... Our average rent is $1,000 and below.  When it comes to repairing appliances, we more often than not just by another used appliance, versus having a service call on the existing one.  (I'm talking kitchen appliances here... not hard wired things like ACs & water heaters)  They are clean, they are working, but they are used.  Here is our philosophy.  We can pick up a quality used stove for on average $100-125, versus $600+ new.  Refrigerator.. probably $200, versus $800-$1000.  Quite literally, we can replace almost any broken appliance for cheaper than calling for service on the broken one.  We will always go and check it out and see if it is just a heating element, or a circuit breaker, or what-have-you... but if its really broken, odds are we are just gong to replace it with a new, used appliance.

A service call on any appliance typically start at $95, then it goes up from there.  We quickly came to the realization that service calls just don't seem worth it.  By the time we pay for parts and the service call, I could have bought another used unit for less.  So I just wanted to throw the concept out to you as an alternative to a lot of service calls (and home warranty idea).  

Again, it depends on your market, and it depends on how much of a landlord you want to be.  For us it's "have dolly, will travel" when its something easy.  We do have some higher priced rentals that would demand nicer appliances with rents in the $1,500 - $1,700 range... 2000sf types in our area.  For those we would probably go with something stainless that was used and might cost us $100 - $150 more than the base level ones we do for the cheaper units.  There are several sources for all of these... you can look up "used appliances" in your area... usually you will get a short warranty. (1-3 months) on them if purchased from a store.  Or, we keep an eye out for craigslist / facebook marketplace ads that look good.  We have a storage shed we keep a set of appliances at the ready so that when someone calls, we have all the basics covered.  

I'm sure someone could make the counter-argument that if you buy new, you won't have to deal with it for years... which is another way to approach it... but for us, it's about minimizing costs where possible as long as we get a reasonable result.  In the three years we've been in rentals we haven't had to re-visit one of the used appliances we put in, so its working for us.

Randy

I have one word for you:  DON’T!!!

A home warranty seems like such a good concept... limits out of pocket expenses and gives you a known maintenance expense.

The problem is this:  Home warranty companies don’t move at the pace you need them to.  Their process is designed to frustrate you to no end! 

Example:  our AC went out at our house.  Any repair guy could have fixed it in a day.  The home warranty company brought in a contractor to fix it...(blown compressor)... first the repair had to be approved by the warranty company... that took several days.  Then the home warranty company insisted on supplying the part  (something any local guy would gone and picked up same day)... it had to be sourced and shipped in, but because of the particular unit it was out of stock.   It LITERALLY took us 4-5 weeks and a dozen frustrating (pass you around to another department / leave a message experiences)  to get our AC fixed.  Ultimately we had to demand / negotiate a cash settlement and brought in a local guy who had it fixed in 24 Hours).  Fixed in a day by our guy after 5 weeks of run around!!!

In that 5 weeks they offered (and did) buy us fans to use to help keep the house cool... but if you live in a hot state like Florida fans just won ‘t cut it.  

Likewise with a dishwasher repair, same thing, they have to order factory parts and they have to be mailed to you.., took 2 service calls and 3 weeks to repair.  

So while home warranties seem like a great solution, I predict they will leave you very frustrated in the end.  I suggest setting aside funds for repairs and maintenance and avoiding the hassle!

The above examples were my personal experiences... can you imagine if it were your tenant?  No AC for over a month?  You would likely have to go buy window units to get them by!

Randy

I have an automatic bank transfer setup that moves $100 per month per door into a separate maintenance account.  This typically covers us on a monthly basis for maintenance (excluding rehabs we opt into, or startup fixes a property needs when we first buy it).

Randy

In Florida, and I presume most every state, the landlord laws in the State  statutes typically address the maximum amount you can charge for breaking a lease... it’s 2 months rent in my state.   

If you’ve never read your state’s rental statutes you should.  It takes like 5 -10 minutes and will make you a smarter landlord to know what you AND YOUR TENANT’S responsibilities are.   you can usually just google “<your state name> landlord statutes” and they will pop right up.

Randy 

You might check your County Property Appraiser's website. Ours has the ability to run a search for similar near-by sales by date. It provides square footage, date, sales price, address, etc. it's a good way to start to get a feel for what is selling and for what price. From there you can dig into individual listings that appear similar by taking the addresses and comparing the qualities of individual properties against the one you are interested in (selling or buying) by looking at the listings on Zillow / realtor.com, etc presuming the property sold through MLS.

Rentals seems to get dinged as being slow... but I would tend to argue that point if you buy right.  We have been getting good (perhaps lucky?) at finding deals with $50-75k in equity at purchase.  

We have one that we purchased for 50k, was worth close to $90k at closing, and it  Zillows at $125k 2 years later.  So 150% return in 2 years ‘ain’t to shabby’!  Sure, that equity is tied up until we refinance or sell, but we could recoup it at any time we wanted.  In the meantime the property is rented for $1,400 a month with no loan... netting $1,100-1,200 a month! It’s not the norm... but the more we get hooked into wholesalers the better our deals are getting.  

By holding it for a year we cut our capital gains tax as well, which is something you often get hit harder with on flips, 

There are plenty of ways to win at real estate though, I agree.   Rentals DONE RIGHT can do quite well... and I didn’t even touch on the tenant paying down your mortgage for you!

Randy 

L A... good to know, as I said, I’m not the expert on them but was trying to give the original poster the lay of the land.  Thanks for the more accurate info!

Randy 

So believe it or not... there's an app for that... albeit on the web:

http://www.hotwatersizing.com/...

Super simple and specifically targeted at hotels / motels.  A lot depends on the temperature rise of your cold water source.  But check it out and let us know. 

From what I played with, it looks like a 120 gallon tank could do it... but it does all the calculations for you.

Totally blown away that could possibly work, but according to the calculator it could!

All the best!

Randy

I'm not the expert on hard money - but in general:  Hard money is a private lender.  To put it in perspective, with $30,000 you could call yourself a hard money lender to people who needed smaller amounts of money... so it isn't some certified / regulated industry.  

Hard money lenders are going to charge you a much higher interest rate than banks, with the theory that they are only going to be lending it for a short period of time. Maybe 7-12%? Just depends on the numbers on the deal. They will also usually charge you points (a percentage of the loan). So 2 points on $100,000 would mean they hand you $98,000 up front, but you have to repay the $100,000 plus interest. You still have to qualify to their standards... but it isn't like a bank ... their biggest questions are, "Is the deal worth it? (risk versus reward, enough margin, etc) "can this guy pull it off" (what is his experience, does he have other resources if he gets in trouble on his numbers), are his numbers right compared to other deals they have done) , and "If he can't, what am I stuck with if the HML is left holding the bag and the guy fails?

In the beginning, how much you have to put into the deal will matter more (as they want you to be on the line with them).  Once you have done a few deals with someone you earn their trust / demonstrate your ability to perform and deliver,  and they will usually be willing to lend to a higher percentage of value, etc.