All Forum Posts by: Russell Roberts

I've had an "All-in-One" HELOC on investment SFR property originated from Ridge Lending for a few years. The line of credit is actually serviced by https://www.northpointe.com/.  

There's an older thread with more detailed discussion on this at https://www.biggerpockets.com/forums/50/topics/628807-heloc-...

The All-in-one has served my needs well.   It is floating rate, which started at 3.9% when rates were low, but is now up to > 9% today.   Because of that rate, I'm paying it down more, but it is still nice to have the quick liquidity available when a large cost item comes up on one of my rentals. 

resolved.  thanks. 

Current Need:   I received K-1s from real estate investments that were located outside my state of residence.  The properties sold in 2022 with significant capital gain.  I need to file both GA and AR non-resident income tax forms.  If you are a tax professional interested in this work at your hourly rate (or preset if you prefer), please "connect" with me on BP and I can provide a more detailed description of my tax filing situation.

I'll pay well because I've reached that point beyond my tax form completion ability.   Additionally, I'm a nice, easy-to-work with person and solid record keeper.  I'm open to offloading all of my individual tax work in 2023.

Thank you.  It's no wonder you have so may BP votes!

Can unused passive losses carried forward from prior tax years be used against active income in the current tax year, if the taxpayer has qualified per IRS rules to become a "Real Estate Professional" in the current tax year?

@Megan Brooks

I completed the purchase of a new SFR for 120K financed via an All in One loan originated by Ridge Lending group. Below is my experience and thoughts.

I signed purchase contract and submitted to Ridge on Jun 8, 2020. They did tell me they were busier than normal and, to be fair, I had not pre-qualified with them. But I am able to easily qualify and submitted a full package of electronic documents to them on the same day. The process of getting loan approved was one of the most detailed (from documentation required) I’ve experienced thus far. Despite me supplying each additional document required within a day of the request, the entire process to funding and sale close date took until Aug 12, 2020. (65 days to close)

Terms:
25% down payment.
2.5% loan origination points on loaned amount, plus other closing cost
1-month LIBOR index plus a margin of 3.75%. The margin is fixed, the index is the variable part. Current rate is 3.
My normal closing cost (excluding prepaids on insurance & property tax) for a conventional 30yr mortgage for similar SFR has been $3800 - $4100 range. The All In One, was $7822. $2,250 of that was the 2.5% loan origination points on this type of loan. In addition, I had to pay an additional 1% down payment so that there was time for the loan to get transitioned to the final lending institution before interest accrued and exceeded the max approved credit limit before I had a chance to make a payment. It took until Sept 11, 2020 (30 more days) before the associated account with Northpointe Bank was set up.

Conclusions:
Loan took twice as long as normal and was more difficult from documentation standpoint.
I paid 26% down payment.
The closing costs were nearly $4,000 above normal.
My credit score immediately dropped from 804 to 775 (with nothing else changing except for the AIO hitting my credit report)
The floating interest rate is reasonable.
The remote banking with Northpointe Bank checking account, mobile app, ACH, autopayment scheduling is all good.
I’ve made this my primary depository account and auto payment source for other mortgages.

Am I happy with the decision? Yes.
For ONE property in an investment portfolio, I like this line of credit flexibility. Instead of letting idle $ (money being saved for future purchases, cash liquidity for repairs, etc) sit in a near 0% checking account, it now sits in the AIO which immediately saves a guaranteed 3.9% interest expense, secured by a SFR that is otherwise making positive cash flow, appreciation and such. It'll take me 2-3 years to recoup the extra front end loan cost, but I'll have the line of credit tool available for many years to come (assuming that interest rates stay reasonable).

Hope this helps anyone else considering this funding option.

At this point, I've changed my mind. Largely due to the lowest interest rates of my lifetime. Cash reserves sitting in a money market are making near zero now. I can purchase a quality turnkey SFR, with a tenant already in it, for a 7% cap rate. The floating All in One rate is now < 4%. My strategy for this one HELOC loan in SFR portfolio is twofold. 1) Place "cash reserves" here, plus 2) my new savings toward down payment of next SFR purchase. This is a win in two ways. It keeps the HELOC loan balance lower, thus reducing overall interest cost and the money sitting against the balance is also making the cap rate of property vs nothing in a money market. It is also a liquidity tool for many years to comes. When I put the spreadsheet to it, I like. Note: On the All in One, the 2.25% origination fee is applied to what you initially borrow, with a minimum loan size of $75K. So I'll initially start with the minimum loan size with some cash reserves taking up the additional space between there and purchase price. I'm doing the loan qualification paperwork now.

For other SFR purchases, I'm locking in the lowest rates in a lifetime for 30yr term.

@Peter Schuyler, I'm glad to hear your investment experience is improving.   I have 2 properties with Memphis Investment Properties.   A summary of my experience on the 2 is:

I initially purchase both in Dec 2017, which is the worst time of year for getting tenants into place. 1 property took 2 months and the other took 3 to get initial tenants in place, however the occupancy has been very good ever since. MIP increased the rent by 3% after one year on one. And increase by over 4% on the other at end of 2 yr lease. I've had one tenant turnover. It cost $1,300, but $550 was taken from tenant security deposit. MIP got it rent ready and released quickly. I understand that their standard lease terms are now for 2 year, with a 4% increase at end of 1st year. They are getting top of market rents. This is only possible because of the quality renovation work they do before sold to an investor. My maintenance and repairs expense thus far has been reasonable. My returns are running very close to their original proformas. I am in process of purchasing a 3rd from them. As a passive investor, the balance of property renovation quality, 8% property management fee, and the Memphis market rent-to-purchase price ratio is something that is hard for me to match in my local market. Reach out to me if you'd like to share thoughts with each other on a conversation.

@Dan Schwartz 

A great thought. Thanks.

thanks for thoughts.  I see where the IRS says, "You have to file an income tax return if your net earnings from self-employment were $400 or more."    It seems like they think >$400 is significant self employment income from that statement.

I read the "Hobby or Business? IRS Offers Tips to Decide"   I think an argument could be made either way.   I.T. services work is certainly not recreation. :)   Maybe if I just billed a few hours of my work at full market rate and then volunteer donated whatever other amount of labor I wanted personally, it would be arguably more for profit incentive.