All Forum Posts by: Scott Schultz

@Account Closed 40 years in? and you havent retired yet? you are doing it wrong if you are still out there hustling. I know it takes some people longer than others, but man i feel sorry for you. Im over here retired at 44, 3 years ago, and living large on my cashflow. Wholesaling is a JOB, just like selling real estate, or fixing cars, or pounding nails, or that mind numbing middle management position at a fortune 500.   Folks take this advice: Never take advice from someone you wouldnt trade places with.  

You just stated you were aware of the defect during your walk through, and sounds like you attempted to negotiate compensation for the damage, and the seller declined, but you still closed, and you waived your inspection. So I would say you have zero leg to stand on here.  And now you just put it in wrighting on this forum that you were aware of the damage prior to closing. 

Now if you were unaware of this, and you could prove the seller knew there was structural damage, thats another story, But just because something has damage, doesnt necessarily mean the structure is compromised, and the sell may have thought it was fine.

Generally you cant get a HELOC on a rental because it not your home, but you can get lines of credit, I have several, I have pooled several houses we have paid off and got Lines of credit against them. the terms typically will be 1-3 years and the rate many be fixed or float. generally this is a commercial product so you need to talk to the business lender not the residential lender. Rates will depend on your credit history, relationship with the bank, and DSCR of the rental, but with great credit and great DSCR you can expect to pay from Prime plus 0 to prime plus 2. Your best bet is small local banks, you have good working relationships with anyway.

Hard or private money is probably your option, I have bought at sheriff sale and used local bank commercial lending, but you need to have an established relationship.   

Some jurisdictions are requiring proof of funds to bid, and in most cases require 10% cash at time of sale in hand, several counties I have bought in require you to register and show the sheriff your cash or money orders.   I typically use my lines of credit secured by the equity in my rentals to buy.  

regarding interest rates, I can almost grantee in 5 years the rate will be 6-7% on this type of note, generally on the commercial side, small local banks lend at prime + or -1 to 4%, if the lender chooses not to renew and you had to take the loan elsewhere what would that look like? I have seen this happen when the market tanked after 2007, where banks just didnt want some types of loans anymore, so they just did not renew. so people had to scramble and find a new lender with little equity, because values had fallen, I watched a lot of investors loose everything, I was listing for banks then, as well as flipping, I saw ugly situations, so when I started buying rentals I put extra caution in place, Currently I have 23 houses and very little debt, many say that is not smart, but we will see who is buying what when the bottom falls out again. 

Best of luck, just be careful, the market is not just toppy, its frothy in my opinion.   

4 of them are currently rented for that? or are listed for rent for that much?  How long can you go without the $1100/mo coming in? Personally I think those numbers are really skinny, if you figure 5% vacancy (low estimate, I use 10%)  and 10% for repairs, maintenance and capX you are well under water, much will depend how the tenant will use the unit, and what repairs/maintenance the tenant will be responsible for. 

Also what is your cashflow in 5 years when you renew your note at 10% or 15%? Last high inflation period the fed rate hit just under 21% so consider a safety net. 

Non QM rates tend to be high, its kinda like long term hard money, so the risk for the lender is much higher, I cant see essentially a private lender locking in a low return for 30 years in a higher risk situation. I have never used Non QM lender, I always used the commercial lenders at local banks, generally 3-5 year ARM amm'ed over 15 years, but always pay them off in 2 or so renewal.

I built 2 houses in the last 2.5 years, and have run the numbers on just what you are talking about. there are a few variables and considerations.  like Lot limitations like what will fit, and what will the municipality allow, Drainage plans often dictate where your building envelope has to be on a lot.  Also foundation type, the less excavating the less cost.  Its always cheaper to go up than out, Lumber is still a lot cheaper than site work and concrete work.   Corners are Expensive, the cheapest is a square or rectangle, every outside or inside corner on the exterior complicates foundation, roof systems adds cost to siding, sofit and fascia, gutters, as well as interior, like drywall, trim, ect.  if you self GC you will spend $150/sq ft at minimum with lumber in flux as well as labor being difficult right now.  $175-200/sq ft is probably more reasonable.  also consider 3+ family in the new construction world is commercial for fire protection code and will require a sprinkler system, this can be worked around in some municipalities with fire separation walls essentially joining 2 duplexes together, but that depends on local code enforcement. 

Design and finishes can translate to better rents, basic is not always the best, not is high end, you need to determine the sweet spot. 

New construction is definitely a long game, with narrow margins, consider what rents may look like especially in a tiny community, they may not support even 1%  But if you have a Pile of cash to park it may not be a bad way to go. 

Im actually seeing days on market  (vs no days on market)  and price reductions on a few properties, it is changing, My neighbor is a mortgage lender, she said the past month has been "normal" where as the past 1-1.5 years has been nuts.

buying turnkey can work, especially if you do and want to park money from you job, or other business, the nice thing about rentals i time is on your side.  Personally I only buy value add, but there are many "retail" buyers, I personally dont understand why, but to each their own, and it can work, but its a long road, but then again it depends what you want out of your properties.