All Forum Posts by: Spencer Fry

Quote from @Patrick Roberts:

There are a handful of investors offering nonQM investment property LOCs that are more like hybrid LOC/cashout loans. In my opinion, you're better off just using a cashout refi and then parking the money in a MMA/HYSA or rolling 30-day treasuries than using these hybrid LOCs. Another option is to cashout refi, park the cash in CD's with decent yields at a local bank/CU, and then borrow against the CDs as needed. Typically spreads on loans collateralized by CDs are around 200 bps. This would basically create a synthetic Heloc.

Some small local banks are offering commercial LOCs on investment properties, but the rates I've seen on these are north of 10%, have low LTVs, have to be rested once per year, have to be renewed every 2 years, and are callable. Whether any of these options make sense will be determined by your use-case.

Thank you for that detailed answer! That is excellent information. I have a number of different avenues I am looking to deploy the capital. One of the properties I am talking about using for collateral is raw land that I am looking to develop. There is also a hotel/liquor store/restaurant for sale that I would like to buy. I would really like to make both happen if I can manage to swing it. 

My local bank was going to give me $400k LOC that had to be rested yearly like you mentioned. It just isn't enough capital to further my investments. My thought process is, if I could come up with $800k on a refinance, I could come in on a cash offer on the hotel for sale and get a much better deal. It would up my cashflow significantly! 

Quote from @Chris Seveney:

@Spencer Fry

Search here on BP there was someone saying they could do it

We have not seen anyone who would do it as we are seeing more and more lenders shying away from being in 2nd position on investment properties

Dang, I did not know that was the case. Thanks for the reply!

Conner, what did you find out with this? Did you find anyone to loan on the investment property? 

I have a few properties that are owned outright. Total value somewhere around $1mill-$1.25mill in equity. I am seeking to obtain a line of credit for these so I can tap into that dead equity. My local banks will only do a heloc on a primary residence. I've heard of other people doing this, but I am not having any luck finding a bank to work with. Hoping you guys with experience can chime in and help a guy out.

Thanks in advance! 

Quote from @Joehn B.:

Do they have smart meters out there? that would pass on electric to the tenants..

That's a good question, I don't know if they do or not! I bet @Nathan Gesner would probably know more. 

Quote from @Sara Levy-Lambert:

1. The 1% rule is a good starting point, but don't let it limit your investment potential. It's important to consider all the value-add opportunities and potential for appreciation in a high-tourist area.
2. Don't just look at the current asking price, analyze the potential rent roll after making necessary upgrades and adding value.
3. As a real estate investor, it's crucial to consider all costs, including utilities. If charging an extra $100 per month per tenant for utilities is acceptable in the market, then it could potentially increase your bottom line.
4. While the 8-month market time might make you hesitant, consider the possibility that the property might not be priced correctly and may have room for negotiation. Always do your due diligence to make informed decisions.
5. Converting a unit into a short-term rental could significantly increase your rent roll and provide additional revenue streams. Remember to consider all regulations and requirements for operating an STR. Google the awning airbnb estimator for an understanding of the potential revenue and to see comparable properties nearby to gather some intel on the occupancy, rates, and amenities and general furnishing of those homes.

This is great information. Thank you for the input. I have heard about the 1% rule many times, so I wasn't sure how close to stick to that. Especially when you start throwing variables such as STR's in the equation. I have not heard of the awning Airbnb estimator. That sounds like a great tool to have in my pocket. That could help me understand my numbers a lot better in my area. I have plugged my numbers into a few different scenarios (pre value adds to after all value adds). Based off those calculations, I feel as though it could be a potentially stellar cash flowing property.
I'll be interested to see how close my vacancy and nightly rates are to the estimator. 
I feel as if I keep getting stuck in the analysis paralysis. I watched more than a few deals go by from pre covid until now. I just wish that I bought more before interest rates rose so high, but I also understand that gives me a little bit more bargaining power at the moment too. I suppose that I just need to make an offer and see where it takes me! 

Quote from @Jerry W.:

@Spencer Fry, welcome to BP bud.  I would definitely give @Nathan Gesner a call.  I have worked a few deals with him and I was very satisfied.  He is honest and pretty sharp in all of my dealings.  I am over in Thermopolis if you ever come through feel free to give me a shout.  I don't have the hundreds of properties under management that Nathan has, but I really enjoy talking real estate.  I have mostly long term rentals, but jumped up to 5 vacation rentals last year.  Would love to chat.

 Thank you! I am looking forward to getting in contact with Nathan. He has an impressive real estate and management company going. I'm sure I can learn a lot from the guy. 

Thank you for the invite. We bring the kids down there to go swimming quite a bit actually. I will make sure to get in contact before we head down next time. It's great to connect with locals that love and have a passion for real estate. I could talk about real estate all day if I could find more people interested in it. I am looking forward to it! 

Quote from @Nathan Gesner:

Quote from @Spencer Fry:

The 1% rule is designed to be a filter for quickly determining whether a property should be analyzed more closely or dismissed. I highly recommend you wrap your head around this before it gets you into a pickle.

Here's a guide that describes what good cash flow looks like and how to analyze a property. https://www.biggerpockets.com/...

Take the actual numbers and plug them into the BP calculator or some other analyzation tool. 

It doesn't matter what the seller thinks it's worth; it only matters what it is worth to you. If you have to buy the property at $250,000 to make it work, then offer $250,000. If they won't sell for that price, then walk away and look for something that works.

 First off, thanks for the reply! The article had a ton of great information. I remember using the calculator on this property when it first popped on the market. I had to revisit the results after I posted yesterday. It really answered a lot of my questions. I'm just eager to get into the game, so I think I'm trying to make this property work versus trusting the numbers and moving on. As you know, our area doesn't have a ton of multifamily properties on the market. It seems those that are on the market are just way overpriced. 

Secondly, it's good to know a Broker Realtor in the area that is on BP with the investor mindset. I'll have to get ahold of you sometime in the future here. Do you know of any local REI groups or meetups? It would be great to connect with more like-minded individuals.

I have a 4-plex I'm currently looking at potentially trying to buy. The area I live in is a high summertime tourist area. As it stands, the numbers do not work to purchase the property at current asking price. Now the rent roll is under market value by about $150-$200 per unit. Also, the electricity meters are located in the basement of the building so the power company won't read the meters, so the current landlord is paying utilities. The utilities average around $400 a month. Is it okay to charge an extra $100 a month to each tenant for Utilites? This property also sits on 1 acre in the country so I believe there is also some significant value adds that I could plug in to add $300-$500 a month. Besides all those factors, I do believe I could convert 1 unit into an STR this summer and potentially double the long-term rent rates. I could possibly convert more units depending how successful the 1st one does in the STR game.

My question is this, does it make sense to pay the higher price? It's been on the market 8 months. The current owner doesn't seem to want to budge on the price. It just seems a little silly to me to pay that high of a price, when after I do all these value adds to the property, from an investor standpoint and based off the 1% rule it would really only be worth $20-$30k more than what they are asking now. Should I be worried about the 1% rule? We do live in a high appreciating area with mountains, lakes and a national park out of our back door. 

Any and all advice would be greatly appreciated!!

Quote from @Michael Cohen:

Kevin Heiden the lender was incorrect. You can rent out the other 3 units immediately. You will be allowed to use 75% of fair market rent (as determined by an appraiser) as qualifying income.

I'm currently trying to buy a 4plex. My Lender told me she didn't think that it was possible to include rent as income to qualify for an FHA loan! I told her I was almost certain you could use 75% of the rental income and she got snotty with me. Maybe it's time I find a new lender!