All Forum Posts by: Tim C.

Thanks Pat!

What kind of tax benefits does a HELOC offer over traditional financing? When you say that you can't sell the property, is that only if the principle hasn't been paid back?

I'd love advice on whom to consider!

Tim

Thanks Mike,

You bring up a great point on being able to refinance to a traditional mortgage any time down road. Using a HELOC will also allow me to pull out the money I need for rehab without going through tedious paperwork. I guess the next step is to start talking to the banks!

TJ

Thanks Joe,

That's a good point about the HELOC, but it doesn't concern me much because I have a pretty strong emergency fund. I appreciate your heads up on all the documents needed for conventional financing, defiantly sounds like a bit of work!

Best,
TJ

Hi BP,

I am looking to get my feet with an SF investment property this year and have a few questions about getting financing from the bank.

Question 1. I own my primary residence free and clear and it is worth $75,000. Would it be smarter for me to go to the bank and get approved for a HELOC or get pre-approved for conventional financing? With the HELOC I could probably leverage 100% of my rental purchase however I'm not sure how interest rates and terms compare between the two.

Question 2. Should I try to get pre-approved ahead of time or wait until I have a deal that I can present? It seems silly to wait until I find a deal, however I have heard that banks would rather see examples instead of hear plans.

Question 3. Are there any other pointers you can give me for when I call and visit the bank? Questions to ask, documents to bring, etc. I'm brand new!

Thanks for your help!

Tim Chasteen

Thanks Mike that was extremely helpful! You're doing pretty well at $150 a door. I was looking at a house off of Dorothy Lane but it's property taxes are $2900 (asking price is $45,000), I keep hearing good things about Kettering but I need to find a way to wrap my mind around those taxes. Yours aren't bad for a 4 unit.

@Account Closed Thanks that's good insight on the windshield plant!

@Mike Schena Thanks for sharing the vectren program! Are you willing to share the math on your 4 unit in Kettering? :)

Oldish thread but I just wanted to ask. Do the extremely high property taxes in Kettering and Huber Heights offset the higher income they bring in? I mean wouldn't you get the same cash flow in areas where the rent is a little lower but property taxes are normal?

I just worry that people from outside the area might see those high rents and not realize they are influenced by the high property taxes.

@Thomas Sill

Here are a couple scenarios I came up with. Taxes are certainly a concern and would have to be under $2000.

$55,000 Turnkey house
70% ARV rule = Comps need to be worth $78,500
"1.5%" rule = Needs to beat $825 a month rent
Average Rent = $850
50% rule = $425 left for mortgage
25% Down payment = $13,750
Rehab = $0
Closing Cost = $2500
Finance = $41250
Mortgage Payment = $197
Cash flow = $228 [$2736 Annual]
Cash-on-cash = 2736 (annual cashflow)/16250(down payment + closing cost) = 17%
Cap Rate = 2736/55,000 = 5%

$40,000 Fixer Upper
70% ARV rule = Comps need to be worth $78,500
"1.5%" rule = Needs to beat $825 a month rent
Average Rent = $850
50% rule = $425 left for mortgage
25% Down payment= $10,000
Max Rehab = $15,000
Closing Cost = $2500
Finance = $30000
Mortgage Payment = $143
Cash flow = $282 [$3384 Annual]
Cash-on-cash = 3384 (annual cashflow)/27500(down payment + closing cost) = 12%
Cap Rate = 3385/55,000 = 6%

Thanks @Coleman Nelson and @Thomas Sill. Thomas I realize my strategy will have to focus on motivated sellers and therefore the MLS might not be my best avenue. Do you happen to own any investment properties in the area? I will be certain to send you a PM when we reach that step.