All Forum Posts by: Zach Westerfield

Do you have PMI with a USDA loan? also, what is your current interest rate. Do you plan on staying in that property for a while? all things to consider.

Right now interest rates on owner occupied properties for refinances are at historic lows, if there was every a time to refinance it is now. However, there are some things to consider...

1. There is a cost to refinance (loan fees, appraisals, etc). This can be several thousand dollars. Although sometimes this can be added to the loan so you do not have to come out of pocket, it is still a cost. If you are planning on leaving the property in the next 2-3 years you will want to consider that.

2. Cash out refi's may increase your monthly payment - once you to do this you are locked in.

Another alternative to consider is a HELOC. This has much lower fees than a Refi, can get you about the same amount of cash, has great interest rates, and best of all you only pay for it when you need it. If your current interest rate is already low, this may be a better option. The down side is typically it has a floating interest rate, so if/when rates start to rise the cost of that money increases.

@Chantal Jones Macon is an interesting market to say the least. Be very careful, there is a ton of risk there. You can definitely find some cash flowing assets, but you really have to know your neighborhoods. One street over can make the difference. Crime is a huge problem, the downtown area has started to revitalize over the last years, but the outskirts can be downright dangerous. My sister lives there, so to answer your question about where would a single woman live? North Macon around riverside. She didn’t consider anywhere else. If you want PM me and I can give you deeper insight.

Educate yourself first. I did a lot of study including reading Mike Butler's Book - Landlording on Autopilot (highly recommend it). It paid off, my first tenants have been my best and I still have them 5 years later. 

Another recommendation - property management is a professional business. either educate your self as if you want to be a professional property manager, partner with someone who has, or pay someone to do it. I think many of the negative connotations around real estate are rooted in the fact that too many people are landlords that dont have a clue about property management. 

yes you can lease the property before closing, i have done this a couple times. once was a lease option contract, and the owner allowed me to sublease the property. the other was for a personal residence, the owner allowed me to lease until closing due to my need for a house immediately. Just work out with the details with the owner, make sure every thing is documented and legal, and they are aware you intend to sublease. i would also recommend you make your tenants aware of the situation and sign them to a month to month  lease until you own the house. if the deal falls through before closing everyone will be in a bind. i would start a new lease agreement once you close and own the property. you can incentivize the current owner to do this because you will be leasing the property from them. more money in their pocket. 

Im curious why your bank is requiring it be rented out? is it a Debt-to-income issue? is so are their other ways you can improve your DTI? ive never had a bank require a property be leased out by closing. as much as closings can get delayed and pushed, that sounds pretty unreasonable, not to mention burdensome on the tenant.

i use cozy. im pretty sure the tenant does not need to create an account, you just put in their email and Cozy contacts them directly and handles the rest. you can also select whether you pay or they pay for the service. Normally i charge the application fee to the applicant, except for military in which i cover the fee. 

the thing i like about this service is you dont have to handle any of the applicants personal information or SSN. i do believe that if you take applicants PII and SSN you are required to have secure storage and prove you are keeping their information secure. As a small manager you may never be called out on this, but for me its one less thing to worry about and less fodder for potential law suits. 

I am currently using a similar strategy. Banks in my area offer renovation loans for 85% of project cost (purchase plus rehab). i use private money to make up the difference on the renovation costs. 

i have also used this strategy and instead of private money, used zero percent interest credit cards. if you have good credit and are disciplined, credit cards can be a great source of capital. many offer 0% interest for 12 months or more. i use the bank product to buy and start the rehab, and put the difference on the credit card. when the property sells (or refinances) i pay off both. 

Disadvantages of credit cards: you need to have good credit to utilize this, and as your balances increases your credit score decreases. once the cards are paid off your credit score will just back up quickly, but you have to plan for the swings if you are looking for additional lines of credit or mortgages. mine can swing as much as 100 points based on where im at on the projects. the good news is ive applied for loans only a week or two after paying $50,000 in credit cards off and my credit had already jumped back up to great levels. 

Also remember that once the zero percent interest periods end, interest rates typically skyrocket (some as high as 23-28%). be careful to watch your timing. Continue to manage your overall credit, and if you approach the end of the period you can typically roll the balance over to a new card for 1-3% one time fee. Thats still way cheaper than even the best 3% APRs out there. 

@Bradley Britt check out the middle Georgia real estate investors club. There is a lot of great knowledge to gain there as well as contacts. PM for more info.

I am also in the Warner Robins area. If you would like to set up a call sometime let me know I would be happy to share what I know (and don’t know).

There are too many other variables to consider to give you a good answer. you have to consider the market, the property, investment strategy, etc. 

In general, forget what the sellers asking price is. Its pretty much irrelevant. Do you own analysis on what you think the property is worth and what you are willing to pay. if your are considering it as a rental, consider how much equity you want to leave in the property and what your cash flow goals are. 

Once you determine your position, that is your ceiling. anything else below that is icing on the cake. Just because the owner is willing to seller finance does not make it a good deal. but it may raise your price ceiling and allow you to work the numbers for your cash flow goals. 

Nick,

i didnt get as lucky as you on the first deal, but i do understand how you feel. i did several and it took a "seminar" on my third property to make me reevaluate my real estate investing path. I would say start by defining you end goal. Where do you want to be in ten years? Do you want to be a property manager in ten years? if so, then deep dive into learning property management. if not, then learn the basics, and focus on your end goal. 

break that goal down into 5 and then 1 year goals that will get you to your ten year goal. 

for example, say your goal is $5,000 per month in income in 10 years, for financial freedom. If you assume each unit you own nets about $100 per month in cash flow, thats 50 units. So you need to buy approximately 10 units per years. 

your goal for the next year is buy 10 units. Now use this to set your weekly/monthly action goals. To buy ten units, you probably cant use the same methods you used before. You need two things, deal flow and capital. so each week or month, set actions that work towards creating deal flow and capital. focus on that. read books and learn those topics. 

this is just an example, but this is the thought process i have been employing. its easy to get distracted on other aspects or ventures since there are so many different approaches to real estate. 

Have you determined if the seller is open to seller finance? The beauty of seller finance is you can structure the offer pretty much any way you want. Work with the seller, figure out their needs/wants. do they need cash now for a down payment on their next property? or do they want to minimize taxes. you can get really creative to make terms so everyone wins.