All Forum Posts by: Tim Porsche

@Adam Bontrager

Thanks for the advice, I really like the idea of doing a low interest HELOC loan but I'll have to talk to my banker sometime soon here and see how much I would actually be able to take out with a HELOC. I think it would be a great option if I can get enough out...thanks again!

@Adam Bontrager

Interesting, so assuming the house is worth $145,000 and I have, say $88,000 remaining in debt on it, that means I could borrow anywhere between $28,000 - $42,500 roughly right? That means I would just need to come up with another $10,000 - $20,000 in that case somewhere for a $70,000 - $80,000 house. Now, another question, if I would get a HELOC loan like that, would that hurt my chances of being able to qualify for a $20,000 no interest for 18 months credit card, as they would see the extra debt I would then have?

Hi @Adam Bontrager

Thanks for the reply. I did think about going the traditional financing route, but doesn't the house have to be in habitable condition before they will lend you money? That was the only issue I had with that. If I'm going to be buying distressed properties, they may not be habitable at first. I have a conventional 20% down loan on my first SFH property I've had for two years now, and an FHA loan on the second property which is a duplex where I currently occupy the first floor, and since you can only have one FHA at a time FHA 203k wouldn't be an option I don't think.

HELOC is an interesting idea. I probably have about $40,000 - $50,000 in equity in my first house. How much of that can I pull out with a HELOC loan do you know?

Hi All, I'm planning to do a live in flip sometime in early 2017, probably around April or May if all goes well. I'll be looking to buy a distressed property in the $60,000 - $90,000, and should have roughly $25,000 of my own money to invest as a down payment. I'm hoping to finance the rehab costs with an 18 month interest free credit card with a $20,000 limit. I'll be doing as much work myself as I can, along with a handy family member, and will just be hiring out the skilled trades, so I think $20,000 should be enough for the type of houses I'll be looking at. I plan to do the work over the course of a year and then sell, as I'll pay a much lower capital gains rate that way.

My question is, given the information above, what would you recommend I use to finance the flip? Hard money, private money, crowdfunding, an online flip lending service, or something else? Hard money will be very expensive for a year+ loan and will really eat into the profits, so that's at the very back of my list right now. Any advise would be greatly appreciated. Thanks!

@Al Williamson

@Andy D.

@Matt Turbitt

@Michele Fischer

Thanks for the replies everyone! Lots of good advice here. So based on what I'm reading, it seems the best thing to do is...

1. Schedule a walkthrough with the tenant a few days before her move out date (since the tenant was there when I bought the place, I never received a move-in condition report, that's another thing).

2. Make any necessary repairs and deduct the portion caused by tenant damages from tenant's security deposit.

3. Have new tenant sign a new lease and include a clause stating that the security deposit must be paid within X amount of days or else the tenant is in violation of the lease (not sure about this one, is that right?).

4. Do walkthrough with new tenant and have them sign off on the property condition form.

Is that roughly what I should be doing? She's not moving out until sometime in September so we still have a little bit of time. Haven't received the exact date from her yet but told her to let me know at least 30 days in advance when she has a firm date.

Hi All,

I purchased a duplex back in October of last year and the upstairs unit was already rented when I bought it, so I let the tenant stay and they have been very good so far. I received the tenant's $500 security deposit from the seller at closing. About a month ago someone else moved into the unit with the tenant and I had them fill out an application and then approved them and had them both sign a new lease together. Now I've been informed that the original tenant is going to be moving in September and the second tenant wants to take over the lease. I am fine with this, but my question is, how should I handle the $500 security deposit? 

Normally when a tenant moves out, you do a walk through, see what needs repaired, get everything fixed up, and the costs to fix whatever was damage caused by the tenant vs regular wear and tear you would deduct from the security deposit. Should I still do this even though it is still actively being rented by the second tenant? Also, I assume I should have the second tenant sign a new lease after the current tenant moves out and require a security deposit correct? Any advice is appreciated, thanks in advance!

Thanks for the replies @Albert Bui and @Jaysen Medhurst. What you are saying makes a lot of sense. 

Albert do you know why duplexes are 15% down but tris and quads are 25%? I can understand why any multi would require more down than a SFH...there are less buyers for these, and the buyers out there are investors who are going to want a great deal, so they would be harder for the bank to get their money back on if they have to foreclose, but I don't understand why duplexes are 15% down and 3-4 units are 25%?

Yes I agree, John Schaub advises getting loans with 10% down from sources other than banks. I just wasn't sure if banks would do 10% down as well on multiple properties. 

By the way, you are only required to live in a multi-family (or any house) for one year before you've fulfilled the terms of getting owner-occupied financing correct? So if you live in the place for at least a year, then go somewhere else as an owner occupant, banks are okay with that right? That was the assumption I was under from reading other's posts online and a few different books. 

@Aron Roytenberg no problem, glad I could help!

Calculate the cash flow and expenses as if you were buying the property and intended to rent out both units. See if it is a good deal or not, figure out what your cash on cash returns would be after including all debt servicing, fixed costs, an allowance for maintenance\repairs, capex, and vacancy. If it's a good deal after figuring all that out, it will still be a good deal if you are living in one unit and renting the other. The difference is instead of the money being paid in the form of positive cash flow, it will be paid in the form of cash savings (you live rent free or almost rent free).

@Jaysen Medhurst Thanks for your response on this. Could you just clarify a couple of things please?

1. You said they only count a portion of your rental income for the debt to income ratio. Could you elaborate on that? Roughly what percentage of rental income do banks count? I know they want to see at least one or two years of tax returns before they will count it as well right? 

2. When you say eventually I would run into trouble only doing 10% down, do you think I could still get at least 3-4 good multi-unit properties with 10% down before running into issues? Assuming they are all strong on cash flow, I live in each one for a year, and have steady full-time job income. This may be a dumb question but looking at it from the bank's perspective would it really be very risky for them since they would have PMI coverage for those loans? Eventually what I may do is pyramid up...trade 4 multi-units for two small apartment complexes or something like that. I'm not entirely sure yet.

I had originally planned on doing 20% down for future properties, but ended up reading Larry Loftis' "Investing in Duplexes, Triplexes, and Quads" and also John Schaub's "Building Wealth One House at a Time" and they both advise not putting more than 10% down when interest rates are low, to really take advantage of leverage, which makes a lot of sense to me. All of this is of course assuming they are good deals and that I would still cash flow well after all debt servicing, fixed costs, and a liberal allowance for maintenance\repairs, capex, and vacancy.