All Forum Posts by: Tim Hendricks

@Melissa Bains I was in your boat several years ago. Once you pass 10 financed properties, you have a lot more financing roadblocks.

A few ideas to consider:

1) Accept a 5-7 year balloon or ARM from a local bank that has portfolio loan options. It took me a little while to get over the discomfort of walking away from a traditional 15-30y fixed rate loan.

2) Pick 2-3 of the homes that you are confident that you will own for a long time and have a strong equity position, and do a cash-out refi. Borrow up to the 75% max LTV. Use the excess cash to pay off a few of your other homes. Yes, you will end up with ~$4K in closing costs per refi, but if you free up enough cash to retire some other debt, enabling more purchases, it will be worth it. Remember, the 10 property limit is on financed properties, not owned.

I just closed on a cash out refi to execute this same strategy. I did a cash out refi with a small rate savings, but freed up enough cash to pay off a portfolio loan that had a 6.25% interest rate on it. My break-even time is ~18 months.

3) Move the 9 homes in to an LLC and take out an umbrella/portfolio loan. You'll get better terms than financing one by one. Once the properties and the debt is in the name of the LLC, and you pay off the mortgages held in your name, they will fall off your personal credit report. This is really a variation on #1 but will likely get you a lower cost.

@Nadine Lajoie Most mortgages have a due on sale clause. Transferring the property from your name personally to an LLC, even if wholly owned, would trigger that clause.

That being said, many people do move a property after purchase to an LLC. The general thinking is that as long as you are paying your mortgage each month it's unlikely that a lender will become aware of the transfer or take any action to force the issue. Most mortgages also have a right to cure - so if you do get "caught" you can move to home back to your name without having to pay off the mortgage.

I would speak to a RE attorney in your state and have her/him review your mortgage.

Lastly, what are you trying to achieve with the LLC transfer? Buying an umbrella liability policy will likely provide you with better protection for less money and hassle, at least until the time where your equity position in the home gets more significant.

@Victor Chen The pandemic hasn't changed much for the majority of my clients. Most are not local and are buying off pictures and my guided virtual tours, so it's same as usual. If anything, the pandemic has accelerated adoption of remote online notaries and other options for closing transactions using technology.

@Travis L. Keep the cash! Cash is king when looking to add to your portfolio and take advantage of any buying opportunities that might be presented. The opportunity cost is likely small - <$1000/year - assuming that you can get 1% interest leaving the $30K in cash and a 4% interest rate on your existing mortgage.

Finding a lender that will do a HELOC on an investment property will be hard. If you really don't want to keep the cash liquid, I would think about paying down your personal debt (ie your primary residence mortgage) and then applying for a HELOC on it. You'd need to consult with your CPA, but many people no longer itemize deductions due to the increased standard deduction, so the mortgage interest on your primary may not be helping you from a tax standpoint. You'll generally get better rate/terms on a HELOC on your primary vs. any other property type.

@Kevin Feltner You may want to consult an attorney in your state. I'm not sure that your 60 day unilateral ability to change terms would hold up in court here in TX.

If you think your tenant will comply and leave without a fight, there's nothing to stop you from trying. But I try to think 2-3 steps down the road. If the tenant refuses to leave, are you willing to file an eviction suit? If so, is the court that handles those open for business? Many are not. If both answers are yes, are you willing to spend the time or pay the money to an attorney to take it to court? Lastly, would a judge side with your lease provision and agree that it is reasonable for a tenant to control whether their dog barks?

I think answering "Yes" to all of those questions is a stretch. Keep in mind the old saying that the only people that win in court are the lawyers.

My philosophy is to try to stay out of tenant lifestyle issues. If the tenant is paying their rent, they deserve quiet enjoyment of their home. You have a good clause to collect the HOA fines and an extra tax for the hassle it causes you. That should be enough to cover your downside risk as well as encourage the tenant to start complying with the HOA rules & regs.

@Ryan Becker are you purchasing in cash or getting a loan? If it's cash, you should be able to close with e-signatures. If not, see if the title company offers RON - Remote Online Notary service. You basically do a video call with a US-based notary. They validate your identity through some questions based on your credit report, then watch you e-sign.

Last option would be what @Charles Carillo said - go to a US Embassy, and they will have a US notary. Plan in advance - appointments are usually required, and I would imagine that getting one is even harder now than usual. Also allow for time for the documents to get back to the US - some lenders will fund off copies, but many require the originals to be back at the title/escrow agent.

@Randy Cooper  Campus properties near the University of Texas at Austin are not leasing nearly as quickly as they would in a normal school year cycle. We are starting to see an uptick in activity as more definitive plans were announced for Fall classes, but the absorption rate is definitely lower and incentives are increasing.

I don't think there will be a long-term impact on asset values, at least near marquis schools.

Hay Legal Group (Colin Newberry) or Midtown Title / Ishmael Legal Group (Doug Plummer). These are both law firms that also have associations with title companies to be able to issue title policies.

CPA - Doug Tidwell, https://lakeaustintaxpro.com/

@Paras Newbe #3 is becoming more unusual, at least in Austin. Many managers have a markup/coordination fee for larger jobs (over $xxxx) but most have moved away from marking up every invoice.

As others said, shop for quality vs. price. Saving $20-$30/mo on management fees is insignificant in the overall scope of the investment, and a problematic PM will cost you far, far more than that.

@Meghanath Reddy

1) rental investments are by their nature long-term. A few weeks or a few months won't have a substantial impact on your investment one way or the other when viewed through an appropriate length time horizon. That being said, Austin real estate is consistently appreciating, so there's money being left on the table the longer that you wait. Interest rates are the other major determining factor. They are low, and will likely stay low by historic standards over the next year or two, but it's quite possible that they will tick up if the stock market continues to perform well.

Mortgage interest rates most closely correlate with the yield on the 10 year US Treasury bonds, not the Fed Funds rate that you hear about so much in the news. The yield on the 10y Tbill goes down when the price of the underlying bonds go up. And typically the prices of bonds go up when the stock market goes down.

This is a fairly gross over-simplification, but gives you a rough idea of how you can expect mortgage rates to move. It's one reason why mortgage rates bottomed out in late March when the stock market hit bottom.

2) Everyone wants cash flow AND appreciation. It's hard to get both in a meaningful way. SF homes will generally be your best bet. HOA does on condos are cash flow killers. Cash flow will be better on suburban 2-4 unit properties, but your appreciation potential will be lower, as it's relying primarily on rent increases to drive appreciation in the underlying asset.

3) I would speak to a local RE attorney and have a co-buying operating agreement drawn up. Everything may look rosy now, but problems may arise, and you need documentation to protect all parties early in the process. Try Hay Legal in Austin - Colin Newberry.

4) Cash flow will be dependent on whether you take debt. NW Austin near Apple is a great location, but it won't cash flow with a typical 80% mortgage. Look further out - Leander, Round Rock, Kyle - if you are only putting 20% down and want cash flow.

Best of luck embarking on this new adventure!