All Forum Posts by: Tim Delaney

I don’t have experience in either market, but be careful with markets that are already booming or at their peak. Not saying either is at their peak, but spend some time analyzing deals in both markets to see what you think for yourself.

Quote from @Dominic Mazzarella:

Quote from @Tim Delaney:

Quote from @Nilusha Jayasinghe:

Quote from @Tim Delaney:

It sounds like you would be in a good position to invest some or all of the RE emergency fund in a “safer” index fund. But there are a couple things to consider. I know you said you don’t expect anything major on the properties soon, but I would take a careful look at what is most likely to need to be replaced soon and figure out how you would pay for that if it needed to be done tomorrow. Could you put it on a CC and pay it off within the billing cycle with either your income or selling some stock if absolutely necessary?

The other thing that concerns me is you mention that you are both high income earners but that you are “trying” to save an emergency fund. Are you able to reduce your expenses quickly and easily if needed? Is your $15k even enough of an emergency fund for you personally? 

 Thank you @Tim Delaney, these are great questions for me to think about. As for the first, yes we'd be able to do that (for example, replacing a water heater which is the mechanical that's closest to the end of its useful life). For the second, by "trying" I don't mean that we're struggling to do that but I see why it comes off that way. I just meant to say that it's our next goal to build that up, having just gone on a spending spree on fixing up both properties in a short period of time. I think we can reduce our spending quickly if needed. I'll keep thinking on these questions!

I was hoping it was just a context issue. Personally I don't keep much cash on hand for emergencies, but I do have a large untapped HELOC that I can use in a pinch. That way my money can keep working for me and I have the peace of mind that I have cash available if necessary. Since you have high incomes and can cut your spending quickly if necessary you should be ok with some cash in a HYSA and some short term credit available. Obviously I don't know your entire situation so take my thoughts with a grain of salt.

That peace of mind you get from a HELOC could be misplaced. Your lender can restrict your access to that credit for a number of reasons. Market conditions being one of them. If the economy takes a downturn, you could wake up to a very uncomfortable email from your lender restricting your access to credit from the HELOC at a time where you might need it the most. You have no control over this. But cash that is yours is completely under your control. Just my two cents.

True. I also have business lines of credit. But I realize those are in the same position. I also have multiple streams of income and the ability to reduce my expenses sharply if needed to payoff a major unexpected expense. But your point is valid, which is why I was asking @Nilusha Jayasinghe what their ability was to stockpile cash quickly. I would not recommend relying on a HELOC as emergency funds for everyone. I also want to clarify that I do still keep a decent amount of cash - just not enough to cover every single property roof at the same time if that ever happened for some reason.

Conference Connect is one that was started by real estate investors.

Quote from @Nilusha Jayasinghe:

Quote from @Tim Delaney:

It sounds like you would be in a good position to invest some or all of the RE emergency fund in a “safer” index fund. But there are a couple things to consider. I know you said you don’t expect anything major on the properties soon, but I would take a careful look at what is most likely to need to be replaced soon and figure out how you would pay for that if it needed to be done tomorrow. Could you put it on a CC and pay it off within the billing cycle with either your income or selling some stock if absolutely necessary?

The other thing that concerns me is you mention that you are both high income earners but that you are “trying” to save an emergency fund. Are you able to reduce your expenses quickly and easily if needed? Is your $15k even enough of an emergency fund for you personally? 

 Thank you @Tim Delaney, these are great questions for me to think about. As for the first, yes we'd be able to do that (for example, replacing a water heater which is the mechanical that's closest to the end of its useful life). For the second, by "trying" I don't mean that we're struggling to do that but I see why it comes off that way. I just meant to say that it's our next goal to build that up, having just gone on a spending spree on fixing up both properties in a short period of time. I think we can reduce our spending quickly if needed. I'll keep thinking on these questions!

I was hoping it was just a context issue. Personally I don't keep much cash on hand for emergencies, but I do have a large untapped HELOC that I can use in a pinch. That way my money can keep working for me and I have the peace of mind that I have cash available if necessary. Since you have high incomes and can cut your spending quickly if necessary you should be ok with some cash in a HYSA and some short term credit available. Obviously I don't know your entire situation so take my thoughts with a grain of salt.

Obviously tough to give advice based on minimal info and no info on your personal situation. Is there more long term appreciation possible if you hold the units longer? How much of a pain will it be to manage tenants? Personally, if I can hold with a little bit of cash flow but good upside appreciation over time I’d prefer to hold.

Congrats on wanting to get started! Based on the questions you are asking I think you need to spend more time listening to podcasts like Bigger Pockets and Bigger Pockets Rookie. Those in themselves are great education.

Degrees won’t help you much unless you are trying to get a job at a large fund. And you definitely do not need a license to be an investor.

It sounds like you would be in a good position to invest some or all of the RE emergency fund in a “safer” index fund. But there are a couple things to consider. I know you said you don’t expect anything major on the properties soon, but I would take a careful look at what is most likely to need to be replaced soon and figure out how you would pay for that if it needed to be done tomorrow. Could you put it on a CC and pay it off within the billing cycle with either your income or selling some stock if absolutely necessary?

The other thing that concerns me is you mention that you are both high income earners but that you are “trying” to save an emergency fund. Are you able to reduce your expenses quickly and easily if needed? Is your $15k even enough of an emergency fund for you personally? 

Quote from @Michael Rodriguez:

@Patrick Roberts & @Tim Delaney- which lenders/ loan types are good for 80%? What about rate and term refinancing? Are you two seeing LTVs higher than 80% on that front?

As I said, check with local banks and credit unions. I have not seen anything over 80% nor would any of my properties be able to afford a loan of more than that with these rates. Can your property actually afford a 90% LTV loan at 8+%?

90% is pretty high. I've never gotten that from a traditional lender but I have heard of people that have. It will probably depend on your experience and connections with lenders. Maybe try some credit unions or smaller banks in your area to start with. The HELOC strategy may work, but many lenders are wary of putting a HELOC on an investment property and if they do they still cap LTV at 75-80%. With the HELOC and then converting it to a term loan you will probably be paying higher interest and/or shorter amortization period on conversion which will mean higher monthly payments. Can your property afford a mortgage of $270k? That is another factor that a bank will consider. I know you mentioned doing STR, but then you need to spend another $10k+ to get it furnished. So for the time being many lenders will probably look at market rates for a long term rental.

I hope you find what you are looking for and it works cash flow wise.

Quote from @Tanya Maslach:

@Tim Delaney 
Thank you.
Agreed - we really don't want to deal with it, as it's the PM's job.

Just trying to be good landlords.

This is the first issue, not the second, with the garbage disposal... (other issue was a leaky toilet we took care of, at our expense). 

 Yes, I realize it was the first time, that is why I would cover the cost in an effort to be a good landlord and not discourage my tenants from reporting future issues. I would also explain that if it happens again that they may be responsible for some or all of the cost. In my leases I put clearly that if a tenant flags a request as emergency and it is determined to be their fault or not an emergency they are responsible for the cost. That's a bit different than this situation, but just wanted to share.