All Forum Posts by: Seattle Eltons

Thanks for the help everyone. I've given them notice and they're actually working with me to get the work done. Looks like the mold hasn't spread so things are looking a bit better now. I'm glad I don't have to get a lawyer (yet).

First of all let me say, a lot of this is my fault for allowing them to stay this long. Due to backed up sewer and lots of rain, water damaged the unit and they didn't tell me for days. Now there's mold everywhere and I need to get the water repairi crew in there and the tenants claim they can't come in unless they're there (like they're going to take their stuff). Due to liability, the water repair company won't work with them in there because of liability. Initially I thought the tenants were going to work with me on this because they felt bad about being behind on rent. I told them it was going to take a while to fix it all, and they couldn't do it with them in there because it's small and they have stuff piled everywhere. So they told me on Friday that they won't let anyone in there without them being there. I've contacted a lawyer but the lawyer's out of the office right now (the weekend). I've never had any issue with tenants up to this point, so I'm new to this process (renting out property for about 9 years). 

Not sure if this is an issue, but their agreement expired and I didn't actually renew it with anything. Sometimes I'm late with that stuff but it never seemed like a big issue before (yeah this is my fault I know). 

So I want to serve them an eviction today, but it might take forever to get them out and in the meantime mold will be spreading to the other units (this is a small basement unit in a converted triplex). There are children in one of the other units so I'm quite concerned about not starting the work immediately.

What I want is for them to be completely gone and all their stuff out so that the water repair can begin and I can move forward to getting a new renter in there. Are there any thoughts? I'm super stressed and feeling a bit desperate right now. 

 I don't think it's a bubble personally. There isn't that much foreign investment as of yet, though it's risen quite a bit comparatively, I don't think it's driven prices up that much unless you live in certain areas in Bellevue. Time will tell on the foreign investing front, but it's not there yet (I'm originally from Vancouver BC). 

High paying tech salaries fueling price rises isn't a bubble, it's the economics of markets. People make more money at attractive jobs, and there's more jobs therefore more people come into an area with money competing with a limited supply of houses, so prices go up. That isn't the definition of a bubble, it's the definition of the opposite of a bubble (market forces creating price instead of artificial prices). As far as cheap debt goes, this may or may not be the case but that will hit other markets much worse and earlier than it hits ours, due to the solid and diverse economy here in Seattle. 

Any time a market appreciates the way Seattle does cashflow will suffer. I bought my first rental in Vancouver BC back in early 2000s, and every month I lost about $200. When I sold 3 years later I had more than doubled my money, so in the long run it works out better than cashflow, but in the short run it's tough to justify. 

Once a market like Seattle hits where it's at right now, it's time to start looking at markets outside of the city where cashflow is had but appreciation isn't a given. If you're lucky you can get both (I have a buddy who bought in Kenmore before it boomed).

A couple of reasons. You can't realistically apply, as aggressively, extra payments to a fixed loan like a heloc due to the open nature of the heloc. I literally plough all my money into my debt every month without concern of lost investment opportunity or concern that something is going to come up that I have to pay for. With a fixed, it's simply not possible to replicate. So you could pay down a scheduled mortgage down each month. It's effectively burying money that could be used elsewhere, and you can't do it as aggressively since no one is going to be able to foresee how much money they can possibly pay extra each month. Before doing the HELOC thing I was paying an extra 350 per month. Eventually I was thinking about increasing that, but ultimately realized that my money was better off somewhere else. I look at my heloc as a holding area. While it's not being put to productive use, it's reducing interest paid. It's literally having your cake and eating it too, except for the interest rate being a bit higher and fluctuating (mine is at 5.5% and could go higher).

Albert, I think I'm remembering that cap wrong and got it confused with a 7/1 arm that I had that had a reset cap of 7% after 11 years or something like that. Sorry for misleading. I think the product that I have caps at 12 or something.

I'm currently paying about 5.5%, up from 4.5% early last year. Not a huge deal, since I now owe 300k compared to the 400k I owed as recently as August. Low rates are a nice bonus, but not high on the priority list for me. Again though, if you're barely squeaking by on the monthly payments and other expenses, think very hard before getting involved in this strategy. It won't help nearly as much.

I guess the question would be if a bank is any more likely to call in a heloc than a fixed loan. I imagine the likelihood is quite low either get called in, but don't have any experience knowing exactly. 

I've only been on my heloc as 1st Lien for 10ish months, but the amount of interest goes down significantly during the first year, which in my case is an intro period of 1.9% (not uncommon). My avg rate may end up being higher, but the amount of interest actually paid will be significantly lower. 

Also, a lot of this depends on how income positive you are. If you're significantly in the black, this strategy seems to be a total lock. If you're barely squeaking by each month, you may decide that it's not worth the risk of interest rate colatitliyy 

there's very little benefit of a fixed loan over a heloc in first position as long as you're not treating the heloc as spending money. The only small advantage is interest rate can't go up. But this is basically a non issue since when you pay your mortgage this way interest rate has a much smaller affect on the total amount of interest you pay. Banks and lenders have been very successful at getting everyone to focus on interest rate, and have profited immensely because of it.

I have yet to see any reasonable argument against doing a heloc as first position. Only people worried about interest rate and now people claiming that it's fraudulent posters. If you try to rationalize the facts of it a fixed loan has little to no rationale. 

By the way, I noticed that most naysayers in here happen to be lenders...who are the people with the most to lose (lenders profit very little on this prosuct). 

I too was intrigued by this when I saw the video by Michael Lush so I started looking into it. Live in one unit of a 4 plex and found a Credit Union here in Seattle that agreed to take the first position of my Home, and because of appreciation and my initial 20% down payment, I was able to get the full 500k. Since my loan was 430 I had 70k open to me. Then I sold another property and instead of sitting on the cash I put it in my HELOC, that way instead of getting .05% in the bank, I was getting about 2k on it because I no longer had much of a payment (about 80k). It also has an intro rate of 1.9 percent which means in the first year alone I'll have paid the debt down to such a large extent interest rate won't make a big difference. It's capped at 7%. But I'd rather pay 7% on 100k then 4% on 350k. Simple math.

Then, all of my incoming rents and my paycheck paid it down each month. I suddenly owed about 60k in 2.5 months. Then I found a deal that I couldn't pass up so I got a massive discount on it since I was paying cash from the HELOC (really hard to do in Seattle). The money was working for me when I had access to it, and ready to go when I found an opportunity worth investing in. I've been singing the praises of this ever since I got mine done back in November, and it truly is the best of both worlds. Access to the cash when you need it, but keeping your interest payment low when you're not using it. I didn't use replace your mortgage at the time because I found the bank myself. I moved all my banking to the institution that issued the heloc. There are many advantages that I didn't realize then, that I realize now, aside from the obvious which I just mentioned.

1. I feel less exposed to the markets now because my principle is getting paid down so aggressively, a 10% swing is easy to stomach since I'm easily getting more than 10% of equity in less than 6 months (depending on the size of my paychecks which fluctuates).

2. I'm no longer compartmentalizing my debts from my earning. Psychologically, I now associate it all as one thing. Every time I write a check off my heloc account I see my debt rise. And every time I deposit rents or paychecks, I see my debts go down, my interest payment go down, and wealth go up. 

3. I get a small rush each month when I see how much debt I've eliminated. I have several other rental properties and I'm going to try and get a heloc in first position on each of them as well. That way I can get access to the capital as well as pay them down faster. If I don't see any good deals then I just pay debts down more quickly while waiting for the next recession or whatever.

4. I realize that the obsession with interest rates is exactly what banks want you to obsess about. They profit from people focusing on interest rate and monthly payment totals. This is how they make money, and why banks always own the most valuable real estate in every major city. Think about it. 

I wondered if it was too good to be true when I first started and I can say that it isn't. It's the perfect product, and the 30 and 15 yr fixed loans seem like such a ripoff in comparison. But it depends on if you have some equity in your home and you're cash positive at the end of every month. Most banks won't do it if you have less than 20% equity.