All Forum Posts by: Ryan Howell

@Richard Camacho - I would likely do a cash out refinance, but only to the limit where I'm still getting solid cash flow with the new interest rates.  

I would say this depends a lot on your goals.  If you analyze this as a rental without you living there, it is definitely cash flow negative and barely covers the mortgage.  I'm assuming at this price, you are in W Asheville or Montford.  I do think these areas are great for long term appreciation, which it sounds like you are banking on, but if they are older homes you may have high repairs to budget for.  That said, I would not pay for a negative cash flowing rental, even in the best areas of AVL and bank only on appreciation.

Now, as a house-hack, I look at this differently.  I would compare the risk vs not house-hacking.  You are getting twice the house for effectively the same mortgage (factoring in the rent to offset).  If you really want to live in this area and this is a lower risk way to do that, then go for it. 

I would either keep the house and rent it out, or sell it now before you have capital gains and put the money into something that gives a better return in your area (small multifamily, etc).  I would base this decision on what gives you the best return AND is the least stressful since you are looking at retirement.  I would keep the money in real estate to help combat the inflation we are seeing.  

Not sure the best place for this discussion, but I'd love to get forum feedback on this topic. We invest in small to mid size apartments, class C typically, in B class areas and with value add with the intent to hold long term. We buy for strong cash flow and generally build a lot of equity in the first year. We are debating our long term debt strategy in this inflationary environment. Our purchases are 10-30 units in size, so we are in the commercial space. We typically buy with small local banks and refinance in 12 months after boosting the NOI. The question I have is how everyone is balancing their portfolio in terms of interest rates and term length. Here is how I see our options:

Small banks:  5-10y fixed, 20-25y amortization, little to no prepayment penalties, low interest rates

No-doc/DSCR loans: can fix up to 30 years, but with significant prepayment penalties, higher rates and points

Agency debt (we've yet to use this):  long seasoning required, low interest, 30y fixed is possible

All this considered, we want to go after agency debt eventually, but don't have enough seasoning, so we typically refi with small local banks.

Ultimately, the question comes down to what will the interest rates be when our balloon comes due and how will the property be valued then, if we have significant rate hikes?  Some of my reading indicates cap rates track with the Fed rate (with an offset) assuming stable jobs, population, etc.  If this is true, we could see significant cap rate expansion in the next 5-7 years potentially and even in 2-3 years when we are looking for agency debt, this could have a big impact.  

To protect against this risk, should we pay extra for DSCR loans for 30y fixed to hedge against this risk?

What are everyone's thoughts on how cap rates are impacted by inflation and how would you balance low interest rates vs longer term loans?  What sort of cap rate expansions are you underwriting right now?  

@Vikas Grover - Overall, they've been good to work with.  I think like many places, they've had some staffing shortages last year, but that seems to be resolved.  To echo @Mitch Davidson - LTRs here are difficult. Everything I own is multifamily with value add. It can be done, but its not as simple as buying single family turn key homes off the MLS. For that reason, there aren't many (or any that I know of) turn key providers.

@Jon A. - I'll message you.

@Vikas Grover - I assume you talking about long term rentals such as multifamily, and not short term vacation rentals.  I'd recommend TonsofRentals.com.  They manage my properties currently.  You're going to get better cash flow in secondary markets around Asheville.  Cash flow is tough to find unless you are willing to do value add. 

Hey @Warren Marshall - I can help with the Asheville area.  @Joseph Bafia and @Mitch Davidson are great resources as well.  

@Nicholas Duffus - You simply use non-conventional loans, such as commercial loans or DSCR loans that lend based on the cash flow of the property and not your personal DTI. You'll pay a bit higher interest rate, but the loan process is also simpler.

@Claudia Ramirez - Monday is @Rodrigo Afanador's meetup.  I should be there.  The BP meetup hosted by @Jordan Lockaby and @Derek Robinson is the one I was referring to.  There is also CREIANC.org you can join...Plenty of options.

@Matthew Jackson - There are a lot of great areas. $200k is tough, but not impossible. You may want to consider value add/BRRRR or partnering. You can focus on something small as well. There are a lot of great towns around Asheville that work well. My advice is don't get too rural.