All Forum Posts by: Cole Booth

I'm constantly looking at the market as I'm a licensed agent with Keller Williams.
I plan to leverage 100k from a HELOC.
I'm just not seeing something that makes me want to dive in feet first.
I person I ran into some who does flips said maybe try doing a flip for the first time to gain the confidence. However I can't bring myself to have to pay all the capital gains taxes.
Also I wouldn't want to need to pay back the HELOC and suffer a capital gains tax payment.

Any advice?

Should I start looking further outside my back yard?

Trying to get a BRRRR that will likely cash flow or break even on.

I'm a reasonable area with relatively low crime rates.

Hey @Cole Booth, getting started is the hardest decision. Wanting to is not enough. You're a broker and you help other people make money in real estate, yet you're hesitant yourself. That's a recipe for some challenges ahead. When you start betting on YOU and stop worrying so much about hypothetical problems, you'll be better off as an investor and as an agent helping others.

I did my first deals with other people's money (partners, etc.) then I jumped into a large deal that was over my head. I borrowed money to get into it and lost it when the deal went south. Talk about lessons. In investing, you should be able to take calculated risks to avoid losing money. That being said, you need to be comfortable with the idea that you may lose what you invest. Do everything in your power to win every deal, but know that the law of averages is on your side when you do lose on one. Just do what you can to minimize that.

When you get confidence in that, then go out and DO IT. Nothing ever happened in a meeting talking about things. You have to Do It. Pull the Trigger. Do all the homework and risk assessments and pull the trigger. Even if the first one is not a home run. Do It! Roll to the next one. You will improve over time and the deals will get better. None of them will ever be perfect. Let that sink in.

Thank you for reiterating my initial response.

0 Votes

Lexington-Fayette, Kentucky

Hey Michael,

Since you are a licensed realtor, there are specific markets you know well, I'm sure. You can see average sale prices and calculate the projected ARV of a property post-rehab. Get in touch with a reputable GC to determine what it would cost to rehab a specific property. It would also be beneficial to run a rent schedule to understand lease amounts if rolling the property into a long-term loan interests you. That long-term loan may allow you to cash out, repaying part of all of your initial investment so that you can repeat the process again. This also mitigates capital gains tax because you are not selling the property.

Make sure you are comfortable with the area you are investing in and pull the trigger!

1 Vote

Lexington-Fayette, Kentucky

Quote from @Eric Lindsey:

Quote from @Cole Booth:

Regarding owner financing in relation to creative real estate financing, an option is to combine private capital and owner financing to secure the highest leverage possible on the purchase of a property. For instance, it is possible to secure a DSCR loan for 60% and have the seller hold an additional 30%, which, would give you the highest possible LTC for any DSCR loan on the market. Any combination of the two is possible and can be advantageous in an attempt to spend minimal capital out of pocket.

@Cole Booth

Your combination of private capital and owner financing as a strategy for optimizing leverage in real estate purchases are great strategies. The idea of pairing a DSCR loan with additional seller financing to maximize LTC is particularly compelling. This could pave the way for acquiring property with minimal initial capital. Thank you for highlighting these creative financing techniques.

You are welcome, Eric!

1 Vote

Kansas City, Kansas

Hey Dan, with a rehab loan, you may be hit with a 5% origination fee if you close with a 203k. It may be difficult to qualify for with the requirement of positive DTI and the submission of tax returns in addition to paystubs. Closing into an LLC with a private money loan removes the need for a good DTI ratio and the submission of tax returns. It is also much more flexible and you can find creative ways to acquire properties with a multitude of loan options.

I'll be available anytime if you need anything at all. Thanks, Dan!

1 Vote

Columbia, Maryland

Hi Holly,

There are quite a few programs we have that do not require liquidity sourcing to ensure you are able to borrow money to close on the property in question. It will help that you have past experience and are not a first time borrower.

Reach out anytime if you have any questions!

2 Votes

Little Rock, Arkansas

Hey Kelly,

You can rehab a property without "flipping" it. Once the rehab is complete, you only need to wait 90 days for the property to season to close on a c/o or r/t loan after you secure a tenant (for the best rates/terms).

You may look into Baltimore for rent ready properties that cashflow or Akron/Canton Ohio for properties that yield healthy returns on rehabs. Every area will have its strength and weakest, just make sure you find what is right for you.

2 Votes

Pittsburgh, Pennsylvania

Quote from @Munish Ashat:

Thanks @Cole Booth, excellent suggestion. With the current rental in the neighborhood, i am expecting a rent of $2400 for each duplex. The DSCR will just shy of 1 at 0.97. The assessed value of a similar duplex in this area with similar construction is about $365K.

You would be able to take leverage down slightly to meet the DSCR requirement of 1.0 for the best possible terms. IO loan terms may help with that also. Two additional workarounds is to run the property as a vacant refi with a 5% leverage cut to ensure you get good terms or to close with a sub 1.0 DSCR which would add to the rate. There are many, many options here. Be sure to choose the one that you feel comfortable with after gathering as much information as possible.

0 Votes

Munish, it would be a great idea to verify rents in the area showing you are able to pass at 1.0 DSCR or greater. Securing an appraisal with the as-built value would be a great investment to ensure you aren't getting in over your head and could sell the property quickly if the investment did not pan out as expected.

0 Votes

Hi Leslie,

You may find it beneficial to pursue a DSCR loan at this time with short-term rents or as a vacant property with market rents to recoup your initial investment. You'll want to make sure you go with a program that has less than a 5-year prepayment penalty if your goal is to refi or sell in two years.

The option to rent to airline attendants or travel nursing teams is likely the best play here to maximize cashflow in the immediate future.

Feel free to reach out anytime if you have any questions at all!

1 Vote

Hey Adam, if the property fits your budget and DSCR requirements to cashflow, you should not have a problem acquiring financing for this type of property as long as your FICO and appraisal are qualifying.

Generally, for a DSCR loan, you are looking at putting ~20% down towards the purchase price plus closing costs. If you are looking to recoup your initial investment, you may want to find a property to rehab that can be cashed out once the renovations are complete based on the ARV. This can occur as soon as 3 months post close with repairs on a short-term IO program.

Feel free to reach out anytime if you are looking for standard or creative financing tips.

1 Vote

All Forum Posts by: Cole Booth

Cole Booth has started 0 posts and replied 16 times.

Post: Having trouble pulling the trigger!

Post: Having trouble pulling the trigger!

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