All Forum Posts by: Ryan Muska

Nope, gotta pay the closing costs. Think about it this way: Refinancing a loan costs money; changing the amount of drawable capital in a HELOC is the same thing as refinancing a regular loan

Your RE Agent works for you - tell them the situation. They will be able to determine how to get the EMD back.

What they could be referring to is being able to buy the property all cash with the help of their HELOC. "Cash is King" as they say, so they may have been able to offer a seller immediate cash and get a discount on the property or purchase it off market at $50k under market/projected value, allowing them to also save money on the interest that would have been paid on that additional $50k had they not used all cash.

However, after reading that article, it seems as if they would not have been able to purchase all cash due to them not making a lot of money. 

It's a confusing article to say the least. In essence, I do not think they actually saved money, I think they were able to make more money than if they hadn't purchased the properties, effectively countering the interest paid on the mortgage. Also, a lot of HELOCs have I/O options during the draw period, so that's how they could have "saved" money

HELOCs are more expensive, but they allow a borrower to leverage money they might otherwise not have. So, if it missing out on a deal because you don't have $50k of additional funds, then a lot of investors see it as worthwhile to purchase homes with this increased interest rates. 

I apologize if this was not clear.

Cash out refi on any residential property 1-4 units depends solely on the property value and the amount of equity you have. 

There's a bunch of ways for the value of a property to go up.

How much money are they going to be in debt for and how much is the purchase price?

Making something good for cash out refi comes down to making it worth more than you purchased it for (typically by forcing equity, buying equity, appreciation, etc.). That way you can get as much of your original capital out as possible. 

Also take into account that HELOCs have high interest rates and although it seems better to do a second lien instead of refinancing your first one, effectively getting rid of the lower interest rate first mortgage, it may actually save money to do a cash out refi on the property instead.

Ways I've seen investors financing homes:

Private money loans (PML)

Hard Money Loans (HML)

Conventional or FHA

DSCR Loan (Debt Service Coverage Ratio)

HELOCs (Home Equity Line of Credit)

Cash-Out Refinances

Cash (is king)

You are paying 5 points for option 1?!?! This seems outrageous for a residential loan, but then again we don't have all the info, so I can't say for certain. 

I would stay away from balloon payments as much as possible

My first investment property has taught me some crucial things that I had no idea would be an issue until it was too late. What are some things you learned? Here are my key educational points:

- Electric Heat --> SUPER expensive for whoever is paying utilities; stay far away from

- Knob and Tube --> Not good for getting insurance carriers to insure your property and it is an outdated and expensive electrical system

- Always negotiate for lower purchase price --> Just because the numbers 'work' doesn't mean you can't get it for lower. I wish I had negotiated more

Nope. Get a licensed individual to help you out.

Would you trust a lawyer that didn't go to law school?