All Forum Posts by: Taft Love

@Austin Fruechting - Thanks for joining the conversation. Your episode is the first one I ever listened to! Your story about walking into banks and asking for unsecured LOC made me think about ways to scale without just using traditional financing.

My plan is definitely to use BRRRR. Thanks to my W2, I'm ok with keeping some cash in the deal (~3-5% of ARV), as long as I'm able to replenish the cash faster than I use it up.

I'll definitely try to get multiple LOCs. A couple of banks have offered $15k (which seems low to me), so I suppose several of those could be enough to move quickly on properties. 

After spending a couple of weeks meeting with lenders, investors, and wholesalers, I've seen some patterns start to emerge. One of them is that many investors are stuck using hard money. This is fine if the deal pencils when hard money is included, but it significantly limits the range of deals into which investors can get involved.

This has me thinking about other options that might exist. The one that keeps coming to mind is private money that is borrowed with different terms. 

I have to imagine that a talented investor would have the ability to find a private lender who would give them a healthy line of credit—at something like 9%—that could be used to purchase and rehab prior to refinancing out.

Has anyone had luck finding private money at better rates or with better terms than normal hard money?

A week or so ago, I posted about my financial situation and asked a slew of questions. I thought it might make sense to follow up after visiting the bank.

In the last post, I mentioned that Episode 239 gave me the idea of using an unsecured line of credit (or multiple lines) to get started in real estate investing. I went to a couple of local banks in Eastern Washington this week, but was disappointed by the conversations I had (though not detered!).

The largest line of credit for which I qualified, according to the bank was $15k, which is about 20% of one of the two credit cards I have. While I didn't expect to qualify for $75k I requested (anchor the negotiation to a big number....right?), I thought half of that was reasonable. Apparently income is far less important than liquidity and stability. Working for startups and living around the world for the past couple of years makes me appear risky, it seems.

This seems to confirm my suspicion that there are four ways to get started:
1) traditional finanacing (20% down)
2) hard money (10-20% down and expensive)
3) cash (if you have it)
4) owner financing (if you get really lucky)

This leads to my question. Are there options that I'm missing? Are there creative (and realistic) options that I'm not considering as I think about how to get going?

-Taft

Hi all!

I'm getting everything lined up to start investing and the biggest hurdle in my way seems to be acquiring property at the right price (duh!). While I don't necessarily want to be a wholesaler, my intention is to create a pipeline of potential properties that I can acquire just like a wholesaler.

Where I'm getting stuck is, what do I do if someone agrees to my price? Seems simple, but I have no clue about the mechanics of the deal after that point.

There are a few no-brainers:
- Write a contract
- Research the title
- Get financing or cash ready for payment

But even these seem a bit daunting. I imagine it makes sense to involve an attorney, but I don't know if state-specific boilerplate contracts are OK to use in this case.

My guess is that I can get all of the information about the title by talking to someone at a local title company. But are there title-related things for which I need to consult another type of business?

Perhaps someone could walk me through what generally happens once someone says yes?

@Nghi Le - I have only had it for a few months. It's definitely in the PMI-for-life group.

Yes, I still have the triplex. That makes sense with the rates. I'll keep the loan where it is unless there's a more compelling reason to refinance. I'd only consider if it was a significant monthly savings even after the refi.

Yes, $40k is definitely enough for 20% down for a relatively low-cost investment property (including rehab) here.

@Jason D. - I had no idea. I thought it dropped off. I suppose I'll need to be prepared to refinance once I get below 80%. Then it begs the question...does it make sense to just pay it down to 80% and refinance as soon as 6 months passes? My thought here is that the increase in cashflow is likely to more than offset the interest costs I would incur by using a HELOC.

@Byron Bailey - Great info. I'll take a look. I would rather have a LOC, but $300-$500 interest every month wouldn't be the end of the world. As long as there are no early payment penalties, it could be a great tool!

@Kyle McCorkel

@Kyle McCorkel and @Thomas S. have both mentioned equity. I'm curious about this. I don't have much equity at this point. I bought it turnkey and used FHA in an effort to keep as much cash on hand as possible.

I get the idea of not putting cash flow back toward principal. The idea was to get to more cash flow ASAP by getting to 20% and eliminating PMI, but you're correct that it is counter to my goal of accessing cash now.

As for the dead equity, I only have about $7k in equity. Is the idea that I should try to get a HELOC now, even if it's a super low balance?

P.S. Thanks so much for all the answers and info. This has been helpful!

Thanks, Chris. This is helpful info!

I don't own anything other than the triplex, so HELOC isn't an option, but a few people mentioned unsecured lines of credit (Episode 239 is what caught my attention). The irony here being that I have access to about $90k in credit card credit without having ever asked for a credit limit increase (even with business expenses, I only use about $5k - pay it off every month).

It does look like unsecured loans are easier to come by than unsecured lines of credit (not sure why...or if that's true). In an ideal world, I'd be in a position where I can treat an unsecured loan or LOC as cash and use it like hard money, then refinance out as quickly as possible.

I have read that cash-out refinances require six months of seasoning. Is that true even if you purchase the property with something other than a mortgage?

Hi all,

I'm new to the forums and real estate investing. I currently own one turnkey triplex that I bought FHA. My goal is to employe the BRRRR strategy in my local market (Spokane, WA). However, after talking to a few lenders, I'm having a bit of trouble understanding how all of the podcast guests got started so quickly, often with very little money.

A little context about me before I ask questions:

- I worked in law enforcement and teaching in my 20's, during which I didn't make much money. I was carrying debt until a year or two ago.

- I have moved quickly in my new career. Now I'm cash poor ($40k liquid but saving fast) relative to my W2 income (over $100k net, annually).

- I don't have many expenses and am saving quickly. My credit score is almost perfect.

- My current triplex is on an FHA loan and cash flows a few hundred dollars a month, but I put it back into principal.

Here's what I learned from talking to a few lenders and banks:

- The lender I used for the first loan allows up to 10 Freddy/Fannie loans. After that, I have to get into commercial loans or private money.

- I can get a rehab loan and use it for BRRR, but will need 6 months of seasoning on the loan before I can refinance my down payment out.

- In my area, according to a local lender, there aren't any banks doing portfolio lending that will be less aggressive than Freddy and Fannie.

- The two banks I talked to said that I'd qualify for around $25k unsecured lines of credit. Qualifying for a $100k unsecured LOC would require "around a million liquid".

- My takeaway was that the best velocity I can hope for is 1 house per 6 months. This is a bit discouraging considering the fact that my goal is to own 40 doors in the next 7 years.

Here's what I'm having trouble understanding:
- I've listened to podcasts where people with less liquid assets and far less income than me bought lots of houses in the first year or two of investing. How?

- A couple people mentioned taking out unsecured lines of credit to get started. How did they do this? There's no way my lender will let me use an LOC for down payment.

- A $100k line of credit would allow me to get started quickly and buy far more than two houses per year, but are there places I can get ahold of these?

I know this is a lot, but any info would be much appreciated. Thanks in advance for the help understanding.