All Forum Posts by: Sam Lewis
Sam Lewis has started 10 posts and replied 277 times.
Post: Overcoming the Idea That Paying Off Mortgages Is A Good Idea
- Real Estate Agent
- Baltimore, MD
- Posts 283
- Votes 227
Originally posted by @Paul Oscar:
I think I made a mistake paying off my mortgage.Now I needed money for down payment for the two rental properties that i am planning to buy. What do you guy think of HELOC for down payment? It seems the rates are still very low.
I'm a big fan of HELOCs. I am hoping to use one as leverage for my next investment purchase.
Post: LTV and it’s benefits
- Real Estate Agent
- Baltimore, MD
- Posts 283
- Votes 227
A common method in purchasing real estate is funding the deal up-front with a hard-money lender, fixing it up, then refinancing it with a loan. Here's a good example. You find a deal for 50K that needs 25K worth of work that should be valued at 100K when you're all finished renovating.
So you're "all-in" 75K, with an ARV (After Repair Value) of 100K.
Boom. You're done the rehab, now what? Time to either (A) sell the property, or (B) refinance and rent the property. For option B, here's when LTV comes to play. When you refinance your newly renovated home (worth 100K) now, a new loan will be placed on the property, typically LTVs are between 65% and 80% on a newly renovated property. So if you're lucky, your LTV is 80%, which means your new loan is 80K, and you can "Cash-Out" the difference between your previous loan (the 75K, assuming you borrowed the purchase price (50K) + renovation costs (25K). So 80K (new mortgage loan) - 75K (old hard money loan) = 5K.
There you go... you just "made" 5K, and you're renting out your property with positive cash flow each month (ideally), and you still have about 20K worth of equity bundled up in your loan (the 20% you have sitting in the property). Now, if your LTV was lower, let's say 75%, you would pull out 0 dollars, since the 75K mortgage loan would be just enough to pay off your hard money lender. at 60%, you end up leaving 15K into the deal, since 60K-75K = -15K. Better LTV, greater leverage and ability to take as much money out of the deal as possible.
Hope this helps!
Sam
Post: COVID-19 Recession & buying oppty
- Real Estate Agent
- Baltimore, MD
- Posts 283
- Votes 227
Originally posted by @Evan Polaski:
Tonight, she is asking where I am going to pick up food to eat and the kids are driving her nuts. By the end of week 3, if things are opening back up, we will be dining out on the beach, staying in a hotel somewhere tropical because we will be so sick of being home, we just need to get out.
There's a beach in Ohio!? Haha
Regardless appreciate everyone's input here. I had a cash out refi get tarnished this week - lender calls me on Monday saying my interest rate went from 5.75% to 8.5%... was about to pull out 35k to use for a buying opportunity. hahahaha, haha, ha. (sobs)
Post: Eviction moratorium? How about mortgage moratorium?
- Real Estate Agent
- Baltimore, MD
- Posts 283
- Votes 227
Originally posted by @Raju V.:
Maryland has cancelled evictions.
Are you serious? Can't find any of this online.
Post: Good time to get in the stock market?
- Real Estate Agent
- Baltimore, MD
- Posts 283
- Votes 227
Originally posted by @Mike Dymski:
The DJI is down 20% from COVID-19. Let's oversimplify and say that it recovers that 20% in a year. Many real estate investors would not get excited about a one year 20% return and then back to single digits....with the uncertainty and risks associated with that one year return. Case in point, the market is going down again tomorrow on the Fed announcement today. Many real estate investors target 20+% IRR (not just one year).
Love this post! Great advice for us to keep our head in the game.
Post: Cash on Cash Return after Cash-out Refi
- Real Estate Agent
- Baltimore, MD
- Posts 283
- Votes 227
Interesting thread, way to go @Richard H. Hope all is going well for you in 2020
Post: LLC or Umbrella insurance?
- Real Estate Agent
- Baltimore, MD
- Posts 283
- Votes 227
@Kyle Myers what did you decide?