All Forum Posts by: Sebby Gabre Madhin

I would take out the money now for a few reasons, agreeing with what some others have said (this assumes of course that you're able to cash out refi with favorable terms and maintain decent cashflow):

--you dont know where the market is going and if that $100k equity will still be there in a few months or a year.  The same market downturn that we expect to make buying opportunities more available will affect your ability to pull cash out.

--if your rental income is enough to comfortably cover the payment, you are losing some money every month that you havent redeployed that $$, but its a softer loss than if you were just pulling the payment out of your pocket (plus you're deducting the interest and that's money that would have otherwise been theoretical, buried in the house so to say).

--you will definitely be more attractive as a buyer and will be able to move more quickly with cash in hand.

--you will likely be more aggressive about seeking and attacking offers when you have that "time is money" incentive since you've already taken the loan.

I would talk to the seller and see if she is open to seller financing. If yes, and you can generate enough funds to come up with the down payment (if any) this would be great.  
if seller financing isn’t an option then I would probable pull the cash out of the condo. I don’t think that you could pull enough out to buy outright but maybe enough to serve as down payment if you get a bank loan on the 3 acre (commercial loan, I guess).  If you or the property don’t qualify for a loan ( or your husband stays from on not wanting more debt—I very much would disagree with him—), I would sell the condo, you’ll be on the hook for capital gains tax unless you find some way to 1031 exchange ( may need to add another purchase?.) 

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I just checked with my Lima One contact yesterday to touch base, was informed that they have not yet resumed the rental loans.

Unfortunately, we were about a week from closing a cash out Refi long term rental loan (did one in February with them as well)—when they announced that they were shutting down that long term rental program for all loans scheduled to close after March 31.

It will be “interesting “ to see when and in what form they resume. I assume the loans will be much less attractive (we were on track to get 30 year fixed, 75LTV at 4.5%, with 3 points—-ahhh COVID!! )

I would echo the no on this one. At $420k, really $470 k (or more) after repairs, I would need much more in rent to justify the outlay.  If you have accurate data in terms of per sq foot cost, it’s not even remotely a good deal even for the area. 

Drop this one and keep looking, you will find something better. 

You’ve gotten some good advice above, esp about setting criteria. In writing. And accepting no excuses for eviction.

I second the vote for google voice.  You get a text and email message if you choose, can tx service to different number if you’re unavailable, etc. —and free (every investors fav price!)

Depends.  How many do you own?  Are you “done” with it in terms of your patience with this route?  I’ve -personally-decided that I have “enough” of 1-4 families and have chosen to transition now to more passive investing. 

Your capital gains tax likely falls in the 15% range, correct?  It costs a bit of money to set up a 1031 exchange with intermediary etc so doubt that you’d come ahead by much in doing a 1031 for such a small gain, since your tax would be $1500 or less in best case scenario ($10k gain)

Hi Bobby. Congrats on the new investment and hope you find good tenants!

We invest quite a bit in the Leesburg/north Lake county market, and I’d love to chat.  Let’s get in touch. 

To clarify, with flipping you wouldn’t be paying capital gains tax, would be paying ordinary income tax since this is considered active rather than passive income (assuming that you haven’t held for over a year and can’t demonstrate that you bought with intent to rent).

That being said, with $100k profit yet low rents, this still probably is a better flip than rental, and you may be better off selling it and just choosing your next investment differently, with rental in mind, so that it is a place that is cheap enough and can be quickly rehabbed for rental grade, and keep that one, ?? with BRRR. Choose one that cash flows well enough to make it worth keeping as rental.

You appear to be doing very well at this though, so might want to keep flipping as well (impressive that you already have not one but TWO people who want to buy your current project before even listing it).  

You indicate that your long term goal is to build a buy and hold portfolio.  With your combined skills, one very good way to grow your portfolio can be simplified as buy 2, sell one, rinse and repeat.  In the current scenario, you would sell the current project, use the $100 k profit to buy/rehab a house that makes sense as a rental (maybe one similar to the one you got for your daughter?) and rent it out.  You can take a mortgage on this if you want, but one small enough so you still have a healthy cash flow. If you can , may be better to just leave it unleveraged and just save the cash flow to add to your war chest as you buy more properties.

You then buy and rehab a second house that makes sense as a flip with the cash that you have left over from your first flip (as well as any money you may have pulled out of the new rental via BRRR, minus what you've set aside for taxes on the first flip). This time you choose a house that makes sense as a flip, and finish it as a flip (upgraded finishes, etc). Sell the flip, invest the profit, pay taxes etc. Depending on how long it takes you to complete these cycles, you will be able to finance your fully paid or lightly leveraged rental portfolio to the tune of 1-2 houses per year.

As stated above, houses in nice B/C neighborhoods make good rentals, lots of blue collar workers who are lifelong renters, and houses in low A/or high B neighborhoods make good flips.  You can buy or sell anywhere, but just keep the end goal in mind as you are choosing what and where you buy...

((If you really want to scale you buy the two houses at once with the proceeds from each flip, keep one, sell one, but this likely doesn’t fit well with your scenario of doing the work yourselves.))

hope I was clear and this makes sense...