All Forum Posts by: Timothy Hillyer

Not sure your Grandparents employment or income status, but if they do not qualify for a traditional loan, even if they do, a HELOC on the Hawaii property will allow them to buy a property in Vegas with cash before the Hawaii property sells. Once it sells they can just pay off the HELOC.

Local in Anchorage here.  I'd agree with James. 4 Plex is likely the best option. I will add that real estate prices are somewhat inflated in Anchorage and its hard to find a 4 Plex on the market that can realistically even have neutral cash flow. Most analysis that I have done shows negative cash flow using a 92% occupancy rate. Obviously this can vary depending on money down, interest rate, etc...  

I cant be the first person to think of this...

In my city there is an owner occupant property tax exemption on the first $50,000.  For seniors age 65 and older the exemption is on the first $150,000.   The standard mill rate in my city is 1614.  So the discount for owner occupants is $820/yr and the property tax discount for seniors is $2460/year.  For regular owner occupants the $820/year of savings is not likely worth the effort, but at $2460/year its different.

Let's say I am senior and I want to rent a house. Is it possible for the property owner to give title of the house to this senior citizen "renter" at the same time put a lean on the house for the full value of the house?  I'm sure you would have to be careful how the contract was written to protect both parties.

The contract could be written as an owner financing contract where the senior pays on the house as an interest only loan equivalent to whatever you want the rent to be. I'm sure there are other ways to write the contract. If renter fails to make the interest payment the lean holder could exercise their right to the property and take the title back.

I'm sure there are other benefits or possibly disadvantages to attempting to do this. A few off the top of my head would be the complexity of the contract that would be needed and the time/effort/cost to get it written. Both parties may need the assistance of a lawyer.  The total benefit here is $2460/year. This could make sense on longer "leases", but not likely shorter term leases.

Could this have some benefit to the owner in terms of delaying depreciation? 

This kind of contract could probably only be written by an owner who doesn't have their own lean against the property.

Might also want to consider the 1.5% per year property taxes, and the approx. $100/unit Water/Sewer Bill.  Weather or not you get tenants to pay for gas depends on how the 4 Plex is set up with 1 or multiple meters.

My analysis utilizing 3.5% down FHA loan on a 4-Plex in the Anchorage area is that the returns are marginal with a fair amount of risk. Also my analysis when including 5% of rents for Cap Ex and 5% of rents for maint shows properties to be cash flow negative.

I am looking to upgrade to a larger home. I currently have 2 rentals with 5 years of rental history plus my current primary residence. I want to buy a larger home and then rent out my current residence. When qualifying for a owner occupant home loan, can I use the expected rent from the old primary residence as income to qualify for the new loan because of the debt to income ratios? I know initially I had to have 2 years of rental history in order to claim the income from other rental properties. I'm wondering if this also applies to the new proposed rental.

Thanks for the advice. I've just scheduled an pest control specialist. Looks like it is almost always the responsibility of the landlord to pay for the extermination.  Cost is approx. $600 for the first visit with as many as $100 for the follow up visits. Another place wanted $850 for the first visit and $400 for follow up visits. Lets hope this works.  Another question. Would this have to be disclosed when I sell the property sometime in the future?

Just got a call from the condo association of my rental townhouse. Apparently, the neighbor found bed bugs in his unit so he was letting the neighbors know (aka my tenants) They told him that they had been having a bed bug problem for the last three months and that a mattress that had been placed on the balcony was the result of it being infested with bed bugs.  Looks like it will need fumigation. The neighbor already has his unit scheduled for fumigation tomorrow. My unit will need the fumigation too.

Who pays for the fumigation? Not sure if my tenants will be willing to pay for the fumigation. Can I take their full damage deposit when they move out? What about the neighbor, can he sue me to pay for his fumigation. Looks like the cost is about $1250 for two visits by the fumigation company.  Any advice appreciated.

I will take back what I said. The HELOC does not result in any net benefit. Thank you all for stressing your point. I had a miscalculation error in my spreadsheet. If the Mortgage Interest rate and the heloc rate were the same, you would end up paying almost the exact same amount in interest. In the two scenarios one utilizing a heloc, and the other simply paying the mortgage minimum P&I, there is no magical benefit. With the HELOC you have more cash flow paid out equal to the amount of interest on the HELOC. The amount of extra principal paid is almost exactly equal to the amount of interest paid on the HELOC. So in the 4% $100k mortgage utilizing a $10k 1st payment from a HELOC. You would pay $1200 interest over 3 years at 4% on a HELOC. Mean you paid $1200 more out of your pocket then if you just made minimum mortgage payments without a HELOC. At the end of 3 years you find you have also paid about $1200 more in principal.

Deleted Post

My calculations show that there is a benefit from Utilizing the Heloc. I have an excel based mortgage calculator that shows interest, principal, total balance for every payment over the loan. I found that in my scenario. $100k mortage 4% interest making minimum payments for 3 years, versus a $100k mortgage with a 4% interest combined with taking on a HELOC @5.5% interest and making a one time principal payment of $10k on mortgage payment 1 paying interest only on the HELOC lead to a $820 net benefit.

Maybe I need to figure out how to include my spreadsheet so everyone can see the math.

Another benefit that I believe there is to a HELOC is the ability to keep a smaller emergency fund. My wife and I in general would keep a $20k emergency fund in cash to cover our living expenses for 3 to 6 months. I got a $35k heloc from equity I had in a rental property. I initially used $20k from the heloc to paydown my primary mortgage that I had had for less than one year below the 20% mark to drop the PMI which I was paying $177 per month. There was absolutely a net benefit of that.