All Forum Posts by: Terri Wyzkoski

It’s important to understand that cap rates reflect a couple things.  They can be a guideline reflecting returns compared with other like investments, but they also reflect risk.  Lower cap rates are typically found in denser areas like larger, more populous cities like Los Angeles  where vacancy rates tend to be generally lower overall, which reduces risk. As we all know, the lower the risk, the lower the reward.  Like a nice fuzzy, little money market or Cert of Deposit investment - they have low risk and lower returns as a result. 

I agree with many here, cap rates are one tool used for guidance…not the only tool to hang your financial hat on.

 You're most welcome.

Adam, the answer to this question is, it depends.

What's your strategy with the property?  Is this a value-add (are you conducting renovations)?  If so, where would that money be coming from if all cash goes on the down-payment?

What's the NOI? Does it cover the proposed debt on 80% LTV loan, which is the most you'll get on a bridge?

A bridge loan will buy you time, but to do what?  What are you going to do in that time to build value in the property to make it eligible for conventional financing?  

I'm a former lender (now CRE mortgage broker), so I'm helping you think through the questions that will be asked.

If you don't have the down payment, the best approach is to either find a lesser-expensive property, or find a partner to invest with you.

For acquiring properties, there really is no value in branding a real estate holding company name. In fact, most borrowers acquire each property in a different LLC. If you buy a property on at 1020 Monroe Avenue, you'll likely call your holding company 1020 Monroe LLC.

Marci,

Create a limited liability company in which you are both 50/50 general partners.  Outlines each of your responsibilities, equity (dollar equity/sweat equity), timing of distributions if any, among other terms, in the Operating Agreement. You'll want to identify the specific strategy (a. buy & hold, b. buy, renovate & flip, c. buy renovate and lease, etc).

I'm happy to talk with you further about the same.  Reach out to me via PM.  This is the best way to handle the legality of the situation, in my experience with clients I've financed over the years.

Dan,

If you've already refinanced your property and have the cash-in-hand, no one can really tell you what to do with it.  The only way you might be affected is if your current lender has language in their loan agreement that has specific liquidity, debt, or other covenants.

Do you have a conventional loan, commercial real estate investment loan, or some other type of loan?

Unencumbered property is a great place to be. Good for you. To assume that lenders will not provide a HELOC on residential investment property is not correct. I'm a 29-year CRE lender, now CRE mortgage broker, and I've always done for the clients of the banks with whom I've worked. I'm happy to make an introduction to a bank who'll provide you the HELOC you require.

While a cash-out refinance is nice, it requires you to use pay interest on money you may not be using. A commercial investment property HELOC only requires you pay interest on the money that is outstanding on the loan.

Reach out to me via IM and we can discuss all your options.

I enjoyed reading these.  Thanks everyone.

In a rising-interest rate environment, and at the ridiculously low 30-year fixed interest rate you currently have, I wouldn't attempt to modify anything.  The problem is that, for $100,000 cash-out, you'll pay at least $20,000 in closing costs with new appraisal costs, phase one, origination fees, etc, and then end up with a higher rate for a shorter term.

You're tremendously blessed with the financing you have now.  And by the time you close, who knows where interest rates will be.  You likely will regret the action for a few thousand dollars cash-out and the cash-flow you're also giving up.

The answer to that question is no.  They use sales and income from appraisals.