All Forum Posts by: Randy Janoe

Jeremy,

Commercial loans dont have to be 20 year am, 7 year balloon. 

My Banker will do up to 25 years, prime plus 0.50%, 5/1 ARM, no balloon, 85% LTV, ~1% or less fees.

You could also do first position/purchase HELOC. Usually up to 70%, 10 year draw (interest only) then 15 year AM. Typically only costs an application and appraisal ($600-$700).

Call 100 banks if you have to and it only takes one to get the terms you need. Just explain you plan to bring them repeat business and dont sell them out over a point or half a percent down the road. Relationships go a long way.

I'm extrapolating some based on debt payment but 150k a door is pretty high for my market.

Asheville is certainly a fun place to live (particularly if you like beer). Real estate endeavors will be tough and market has really peaked. No where near the supply that there needs to be. However, coming from California, prices aren't such a shock as they are for locals outside of Asheville proper.

I think it may be wise to best time in a good commercial banking relationship. Borrowing in the business name is typically going to be more transparent than moving funds in and out of personal debt (HELOC). I am sure there are proper ways to find business account from personal but I'm not a CPA, just be cautious of comingling of funds.

Commercial loans typically have higher rates, however, I'm usually quoted prime plus 0.50% to 1.00%, which are similar terms HELOCs.

They typically only amortize on 20 year terms (sometimes 25) so that can decrease cash flow but accelerate principal refuction.

Rates are usually locked for only 5 or 7 years. But, if one really uses leverage, on a 20 year am, pulling out an additional 20% equity is feasible after about 6 years. So the fixed rate portion is irrelevant IF continuous refinance and maximizing leverage is your strategy.

The only potential issue I see with HELOC to fund buy and hold is that HELOCs typically have 10 year interest only period (draw) and 15 year amortization period.

This means that you CAN refinance at the 10 year mark to have flexibility but that assumes the market will bear the refinance and you cant control timing well. If the line cant be refinanced, you may enter into the 15 year am period and it can crush cash flow if your assumptions were using longer terms such as 20 or 30.

Further, unless it is a fixed duration HELOC loan, it is probably a variable rate. Expect Fed to move rates at least twice next year.

A HELOC may be a great use for flips to avoid 12% hard money + points.

Sounds like you know what you feel comfortable with, stick to it! I'm unsure what your typical rental price point is, but you could consider going out of market and buying inexpensive homes for cash.

For example I can go 3 hours away and buy outright for what a down payment would run where i live.

If you are interested in out of state deals, you could clear $300/mo and using your 70k down payment own the property (or two) free and clear.

Hi Lauren, I could potentially be interested in investing in one of your future projects , also local to the Asheville area.

Nice, homes in WNC are not plentiful, particularly at that price! Nice work!

think about paying debt as guaranteed returns. If your student loans are unsubsidized at 7%, that's a decent return to knock those out.

Keep in mind a 1098-T allows for student loan interest deduction from taxes, so it reduces your effective interest rate. On that balance, probably $200-$300 net effect on your tax liability.

Maybe a balanced approach would be best. Reamortize student loans on longest term at best rate as possible. Enjoy the liquidity, benefits of the 1098-T and the extra cash flow can help you leverage rental properties.

However, I'm a firm believer in if you have debts have an asset behind it. I would never pay off my autos or house personally (for asset protection and leverage), but never use long term unsecured debt (>60 days). 

Up to your comfort level.

If you are interested, I could point you to a market where you can buy a free and clear condo for 30K and it will cash flow $500-$550/mo and probably pay all or close to your student loans payments.