*** Official Real Estate Forum *** (2 Viewers)

[BigJim®]

are you going to sell your current primary to move?  I don't see the need for a loan here.........

Eventually yes, but not until we successfully purchase the house we're eyeing. We wouldn't risk selling our current home and then being SOL if the target home sells to someone else. Turns out my question may be moot. I was fearing our existing mortgage would hold up financing prequal for the new place (i.e. focus on x2 monthly payments rather than equity). We met with a broker though and he's prequalified a 1st/2nd where our equity goes seamlessly toward the new home upon sale, and we only need to fund down payment. I'm going to get more specifics though as the terms may be less favorable than other options.

 

[Chemical X]

Eventually yes, but not until we successfully purchase the house we're eyeing. We wouldn't risk selling our current home and then being SOL if the target home sells to someone else. Turns out my question may be moot. I was fearing our existing mortgage would hold up financing prequal for the new place (i.e. focus on x2 monthly payments rather than equity). We met with a broker though and he's prequalified a 1st/2nd where our equity goes seamlessly toward the new home upon sale, and we only need to fund down payment. I'm going to get more specifics though as the terms may be less favorable than other options.

I have done this 2x.....you could always add a contingency that you have to sell your house in order to complete the purchase.

 

[BigJim®]

I have done this 2x.....you could always add a contingency that you have to sell your house in order to complete the purchase.

Thanks. We thought about that but understand most sellers balk at that contingency, probably for good reason.  

 

[Chemical X]

Thanks. We thought about that but understand most sellers balk at that contingency, probably for good reason.  

they wont balk, a contract is a contract.........they will keep marketing the property though and if a non contingent offer comes by, then you may get bumped, usually unless you remove your contingency.

what we did was know that we wouldn't sell our house until we bought the new one, if this meant carrying 2 mortgages for a period of time, so be it.  we knew the numbers and had the income to qualify at the bank to carry both notes.  the bank is also somewhat understanding if you explain that you will be selling your primary in order to purchase the new home.  if that is the case, they will only factor in the new mortgage, not the existing one.

 

[BigJim®]

Has anyone risked buying after significant ("six figures") stucco test failure? I'm sure the investor/seller will be shell shocked. She'd bought in 2013 and put $140K toward interior awesomeness - and was breaking even. A great new roof also after a 2015 hail claim. I'm not sure if she will risk more money to fix, or try to sell at a discount. Something has to happen with this property, right?   

 

[GoBirds]

Financing question for anyone that holds properties financed through commercial loans/tied to treasury..........are you rushing to get things refinancing due to the potential rising rate environment or of the belief that rates can only increase so much without destroying the economy? Interested to get some input as we look at doing some early refinances. 

 

[Random]

My HELOCs are tied to prime (-.25 I think).  I've been paying mine off as fast as possible since I started.  Still doesn't make sense for me to refi, based on my smallish loan amount and relatively high closing costs. 

 

[Zegras11]

Financing question for anyone that holds properties financed through commercial loans/tied to treasury..........are you rushing to get things refinancing due to the potential rising rate environment or of the belief that rates can only increase so much without destroying the economy? Interested to get some input as we look at doing some early refinances. 

I finished a refi in Dec.    I was tied to 6month libor.   Noticed a decent jump in the index last August, during the middle of the refi process.  Super glad I did it now.

 

[GoBirds]

I finished a refi in Dec.    I was tied to 6month libor.   Noticed a decent jump in the index last August, during the middle of the refi process.  Super glad I did it now.

Debating a 7 year option in low 4's or a 10 year close to 5%. Feel like rates are going up but long term trying to get s feel if they will really go high enough to justify the higher rate for 3 more years locked. 

 

[ghostguy123]

Looking into purchasing another rental.  Quick question on down payment.  What is the typical down payment required for a rental?  I don't have any debt except my house (which I have equity), and I outright own my current rental property that I have been renting out for the past 3 years.  

The property will cost about 70k (won't need more than a few hundred bucks before renting it out).  I guess I am asking what is the LOWEST down payment that lenders are requiring these days?  I can put down 25-30%, I I just really don't want to.  

 

[GoBirds]

Looking into purchasing another rental.  Quick question on down payment.  What is the typical down payment required for a rental?  I don't have any debt except my house (which I have equity), and I outright own my current rental property that I have been renting out for the past 3 years.  

The property will cost about 70k (won't need more than a few hundred bucks before renting it out).  I guess I am asking what is the LOWEST down payment that lenders are requiring these days?  I can put down 25-30%, I I just really don't want to.  

I would think in the 20-25% range would work if you have a proforma showing good cashflow once leased.

 

[ghostguy123]

I would think in the 20-25% range would work if you have a proforma showing good cashflow once leased.

I know 25 would work.  I just don't want to put that much down.  

 

[Zegras11]

I know 25 would work.  I just don't want to put that much down.  

if you were to put 20 percent down on three rentals two years ago using your 100 percent home equity, how much equity would you have today?

 

[ghostguy123]

if you were to put 20 percent down on three rentals two years ago using your 100 percent home equity, how much equity would you have today?

I have no idea, why?

 

[Zegras11]

I have no idea, why?

want to see you safely get rich with rentals.  

 

[ghostguy123]

Do you mean in my current home or all my property combined?

 

[ghostguy123]

I assume you are telling me to just shift my equity into rentals?

 

[schlesinj]

I finished a refi in Dec.    I was tied to 6month libor.   Noticed a decent jump in the index last August, during the middle of the refi process.  Super glad I did it now.

Libor is gowing away in a few years, so make sure you know what the loan will be linked to.

 

[Zegras11]

Libor is gowing away in a few years, so make sure you know what the loan will be linked to.

Didn't know that.  Got 3.26 fixed for 35 years.  

 

[ghostguy123]

if you were to put 20 percent down on three rentals two years ago using your 100 percent home equity, how much equity would you have today?

I guess I didn't mention.  I own my current rental property free and clear, have had stable tenants for 3 years paying 750 to start and now 775.  I paid 40k for the place and put some money into it, and it would easily appraise between 55-60k based on other similar properties that have sold in the same complex, and also properties listed for sale now.  

The rental I want to buy, at most, would cost 70k.

What sort of options would I be looking at regarding using the other rental to take out a mortgage and use that as a down payment for this next property?  I would like to be able to do this without using any (or hardly any) of my savings if possible.  

I have an appointment at my bank tomorrow afternoon, but just looking for some conversation here leading up to that.  

 

[Zegras11]

I guess I didn't mention.  I own my current rental property free and clear, have had stable tenants for 3 years paying 750 to start and now 775.  I paid 40k for the place and put some money into it, and it would easily appraise between 55-60k based on other similar properties that have sold in the same complex, and also properties listed for sale now.  

The rental I want to buy, at most, would cost 70k.

What sort of options would I be looking at regarding using the other rental to take out a mortgage and use that as a down payment for this next property?  I would like to be able to do this without using any (or hardly any) of my savings if possible.  

I have an appointment at my bank tomorrow afternoon, but just looking for some conversation here leading up to that.  

Take out 15K Line of credit on your house and use that for the 20% down on the new rental.   70k in the two loans will be like $400/mo payment. Rent for $775 and you have another nice profit.  You could safely do three of these IMO.

 

[ghostguy123]

Take out 15K Line of credit on your house and use that for the 20% down on the new rental.   70k in the two loans will be like $400/mo payment. Rent for $775 and you have another nice profit.  You could safely do three of these IMO.

So taking out the line of credit on my current rental to use for the down payment on the other should be easy peezy then?  

If so, then this is definitely the route I want to take.  The property I am looking to buy is actually a 3 bedroom, where as my current rental is a 2 bedroom, and would rent for 900 minimum (other 3 bedrooms in the complex currently renting for 950 is very similar condition. 

With both properties and 70k in loans, plus both maintenance fees, plus both property taxes, my monthy payment would be around 800 which would pretty much be covered by just my current rental.  Plus that extra 900.  

I do not currently have 3 properties I am interested in buying, so just gonna settle for one for now 

 

[Zegras11]

So taking out the line of credit on my current rental to use for the down payment on the other should be easy peezy then?  

If so, then this is definitely the route I want to take.  The property I am looking to buy is actually a 3 bedroom, where as my current rental is a 2 bedroom, and would rent for 900 minimum (other 3 bedrooms in the complex currently renting for 950 is very similar condition. 

With both properties and 70k in loans, plus both maintenance fees, plus both property taxes, my monthy payment would be around 800 which would pretty much be covered by just my current rental.  Plus that extra 900.  

I do not currently have 3 properties I am interested in buying, so just gonna settle for one for now 

Buy one like this every 2 to 3 years for awhile and you will retire very well off.

 

[ghostguy123]

Buy one like this every 2 to 3 years for awhile and you will retire very well off.

At what point would you hire a property manager to take care of pretty much everything for you for all your properties?  I have someone helping me now but she isnt technically a property manager, and is cheap.

Working full time with young kids will not allow me to be very hands on for a while.  

Also, side question, where do you produce your lease agreements?  Website?  Lawyer?  Make your own?  

 

[ghostguy123]

How much cash do you need to aquire to be able to own an apartment building with say 50+ units?  Ya know, the kind of building where you have a full time person running things along with a full time handy man?

Preferably in an area where people count sheep to go to bed rather than counting gun shots.

 

[Zegras11]

At what point would you hire a property manager to take care of pretty much everything for you for all your properties?  I have someone helping me now but she isnt technically a property manager, and is cheap.

Working full time with young kids will not allow me to be very hands on for a while.  

Also, side question, where do you produce your lease agreements?  Website?  Lawyer?  Make your own?  

At what point?   When you feel you're not in total control and/or you see some upkeep slipping.  It's good that you have someone now, try and find another just like it.  I had two handymen when I had 7 units (3 and a 4) compete with each other for repair jobs.

For lease agreements, we make our own after googling local laws, local RE commission and local apartment association. 

 

[Zegras11]

How much cash do you need to aquire to be able to own an apartment building with say 50+ units?  Ya know, the kind of building where you have a full time person running things along with a full time handy man?

Preferably in an area where people count sheep to go to bed rather than counting gun shots.

Depends on the area of the country.  Loopnet.com lists complexes all over the country.  I set up searches in many cities and then analyzed each property/new email listing to see if they made sense to me. Also called many agents in those areas adn asked many, many questions to get the answers I needed.

 

[ghostguy123]

I need to go back about 40 pages and read.  I know you and some others have a ton of info posted in here.  

I still need to get off my ### and go get umbrella coverage.  

 

[pantherclub]

I assume you are telling me to just shift my equity into rentals?

absolutely

 

[pantherclub]

I need to go back about 40 pages and read.  I know you and some others have a ton of info posted in here.  

I still need to get off my ### and go get umbrella coverage.  

where do you live at?

 

[ghostguy123]

where do you live at?

northeast Ohio

 

[Chemical X]

northeast Ohio

make sure each rental property is deeded to its own LLC.  1 LLC for each rental for liability purposes.

 

[ghostguy123]

make sure each rental property is deeded to its own LLC.  1 LLC for each rental for liability purposes.

I  have never even looked up anything about an LLC.  

 

[ghostguy123]

Ok, so negotiations are over with this 2nd rental property.  Condo, 3 bedroom.  Price plus closing costs for me will be right about $70,000.  At most I have to put about $1,000 into it before renting it out, and this is if I need a new hot water tank.  Otherwise doesnt need much.   Maintenance fees 135 per month, taxes about 120 per month.  Rent will be between 900-950 (I may just list right away at 900).  Similar condos in the same complex range from 900-975.  

There is another one in that complex, 2 bedroom, that is a foreclosure that has been sitting there for a year. Currently listed at $41,000 but needs at least 10 grand to get it rented out.  The have lowered the price every month for the past 5 months.  If it goes down near 35 I was very much considering an offer of 30k and using my home equity on my other property for that one so could come in with a quick cash offer.  My realtor knows the realtor for that property personally, and she just wants to get rid of it.  Maybe wait and make her good and ready to unload it for dirt cheap maybe in a couple months.  

It would be a tough project to tackle.  It needs a LOT, and I am just too damn busy for a project like that, so who knows.  

 

[Chemical X]

pretty excited here.....my neighbor just listed their house for sale at $153 sq./ft., which makes mine worth $401k based on size alone.  We have a superior product as far as kitchen, bathroom, closet, upgrades and lot.  with our goal of paying off the mortgage in about 3 years and moving to Italy, I am just hopeful trump doesn't destroy the economy so we can max out return.

 

[Timmay]

pretty excited here.....my neighbor just listed their house for sale at $153 sq./ft., which makes mine worth $401k based on size alone.  We have a superior product as far as kitchen, bathroom, closet, upgrades and lot.  with our goal of paying off the mortgage in about 3 years and moving to Italy, I am just hopeful trump doesn't destroy the economy so we can max out return.

I'd sell now.

 

[Chemical X]

I'd sell now.

just a bit too early......

 

[sbonomo]

I guess I didn't mention.  I own my current rental property free and clear, have had stable tenants for 3 years paying 750 to start and now 775.  I paid 40k for the place and put some money into it, and it would easily appraise between 55-60k based on other similar properties that have sold in the same complex, and also properties listed for sale now.  

The rental I want to buy, at most, would cost 70k.

What sort of options would I be looking at regarding using the other rental to take out a mortgage and use that as a down payment for this next property?  I would like to be able to do this without using any (or hardly any) of my savings if possible.  

I have an appointment at my bank tomorrow afternoon, but just looking for some conversation here leading up to that.  

It is unfathomable to me to think of a home that cost that much.  Good for you and keep investing in them.  

 

[ghostguy123]

It is unfathomable to me to think of a home that cost that much.  Good for you and keep investing in them.  

I lived in one of these for three years, one of the 3 bedrooms.  It was me, my wife, and our daughter.  1,200 square feet with a garage.  It had running water and everything.

In all seriousness, chances are you just haven't been to places where cost of living is lower.  These condos are actually located directly across from one of the higher rated public schools in Ohio, and are perfectly suitable in every possible way.   The teaching jobs are next to impossible to get here unless you know someone because the area is nice.  

If this condo was in NYC is would probably cost millions.

 

[pantherclub]

Ok, so negotiations are over with this 2nd rental property.  Condo, 3 bedroom.  Price plus closing costs for me will be right about $70,000.  At most I have to put about $1,000 into it before renting it out, and this is if I need a new hot water tank.  Otherwise doesnt need much.   Maintenance fees 135 per month, taxes about 120 per month.  Rent will be between 900-950 (I may just list right away at 900).  Similar condos in the same complex range from 900-975.  

There is another one in that complex, 2 bedroom, that is a foreclosure that has been sitting there for a year. Currently listed at $41,000 but needs at least 10 grand to get it rented out.  The have lowered the price every month for the past 5 months.  If it goes down near 35 I was very much considering an offer of 30k and using my home equity on my other property for that one so could come in with a quick cash offer.  My realtor knows the realtor for that property personally, and she just wants to get rid of it.  Maybe wait and make her good and ready to unload it for dirt cheap maybe in a couple months.  

It would be a tough project to tackle.  It needs a LOT, and I am just too damn busy for a project like that, so who knows.  

Question for you.  I am currently mirroring you with 2 rentals.  One is exactly the same as your condo.  Rents for $900 paid $95000 for it. Nice nice unit in a great part of town and its in a retirement village so to speak.  I put $25000 down with my home equity.  However I am having problems getting that knocked dow.  Every time I try and save up with the extra I get between my mortgage and the rent I am shelling it out for one thing or another in one of the two properties.  Just this summer I have had to replace storm doors, hvac unit, water heater and just a bunch of small but costly items.  I still have about $100 grand in equity I can go into if I need it for another property but I am hesitant because I am not making much head way knocking down my original $25,000.  Any advice on how you do it or anything overall/  thanks

 

[ghostguy123]

Question for you.  I am currently mirroring you with 2 rentals.  One is exactly the same as your condo.  Rents for $900 paid $95000 for it. Nice nice unit in a great part of town and its in a retirement village so to speak.  I put $25000 down with my home equity.  However I am having problems getting that knocked dow.  Every time I try and save up with the extra I get between my mortgage and the rent I am shelling it out for one thing or another in one of the two properties.  Just this summer I have had to replace storm doors, hvac unit, water heater and just a bunch of small but costly items.  I still have about $100 grand in equity I can go into if I need it for another property but I am hesitant because I am not making much head way knocking down my original $25,000.  Any advice on how you do it or anything overall/  thanks

I am not going to be the best for advice, but the way I approach it is as follows:

My first rental was paid for in cash, so that is always a positive cash flow barring disaster.

The rental I am about to obtain I will have a mortgage on.  My total monthly expenses (principal, interest, taxes, insurance, and condo association fees) on a 15 year mortgage are going to run me right around $700 a month, while I should rent it out for $900 or slightly higher.  I do not expect positive cash flow from this condo until it is paid off, and I am ok with that.  I just plan to do the best I can to minimize the amount of negative cash flow I have because I do expect a negative monthly cash flow from this second rental due to expenses and potential for unoccupied months here and there along the way.  

I think owning my first rental with no mortgage is going to be a huge help regarding monthly expenses.

Like you, I do want more properties, and I have equity I can use.  Like you, I am also hesitant/afraid to bite off more than I can chew.  I might try and pay this second rental off as fast as I can with my primary income.  I will only have about a 54-55k loan on this second one, so I think getting this one paid off somewhat quickly is doable.   I may just apply all of my rent from the other unit towards this one.  

I know some of the other guys in this thread are cool having mortgages on like dozens of properties, but to me that would be biting off more than I can chew.

 

[pantherclub]

^Thanks.  So for the second unit that you used for equity how do you anticipate paying off the equity line?   My financial advisor says I am silly to have that much equity on the sidelines when it could be working for me.  I understand this but I dont want to go into 100,000 in equity dept at around 4%.  I get that in 12-15ish years this should in theory turn into straight positive cash flow and I could pay it off quickly then but a part of me just seems skeptical of this.

Another option I have been discussing is flipping.  I have a partner that will do this with me but then the net profit comes in around $15000 generally.  Flipping houses is not as easy or as lucrative as they make it seem on TV.  (shocker I know)

 

[BassNBrew]

make sure each rental property is deeded to its own LLC.  1 LLC for each rental for liability purposes.

Why?

You'll have a tougher time getting an umbrella with everything in a different LLC.  Not sure about Ohio, but what it's costs to have 5 LLC's would pay for more than $10mm in coverage.  With an umbrella, the insurance company is paying the lawyer.  With an LLC you're paying the lawyer.  Even with a separate LLC, the plaintiffs will attempt to pierce that veil (seen it first hand).  You'll get to pay $300-$400 an hour to keep it intact.

Note - I'm just having a discussion here and not giving legal advice.  Talk to your insurance agent and lawyer for your specific situation.

 

[BassNBrew]

^Thanks.  So for the second unit that you used for equity how do you anticipate paying off the equity line?   My financial advisor says I am silly to have that much equity on the sidelines when it could be working for me.  I understand this but I dont want to go into 100,000 in equity dept at around 4%.  I get that in 12-15ish years this should in theory turn into straight positive cash flow and I could pay it off quickly then but a part of me just seems skeptical of this.

Another option I have been discussing is flipping.  I have a partner that will do this with me but then the net profit comes in around $15000 generally.  Flipping houses is not as easy or as lucrative as they make it seem on TV.  (shocker I know)

Unless you are doing the work yourself (or a lot of it), it's a tough business.  Everyone is so busy it's hard to get anything done.

 

[pantherclub]

Unless you are doing the work yourself (or a lot of it), it's a tough business.  Everyone is so busy it's hard to get anything done.

I do a lot of work myself.  Build decks, stuff like that.   If I needed to reconfigure a room or add a bathroom etc then I have a couple of guys I can use.  Not worried about the renovating just looking for the sweet price point deal on a foreclosure or whatever.  If the margins are razor thin then I keep on looking.  Not worth the risk.

If i had this type of cash on hand and experience and knowledge that I know now in 2008 I would be about 8 steps ahead of the game.  Cannot imagine the insane deals folks got in 08-10 when the bottom fell out

 

[BassNBrew]

^Thanks.  So for the second unit that you used for equity how do you anticipate paying off the equity line?   My financial advisor says I am silly to have that much equity on the sidelines when it could be working for me.  I understand this but I dont want to go into 100,000 in equity dept at around 4%.  I get that in 12-15ish years this should in theory turn into straight positive cash flow and I could pay it off quickly then but a part of me just seems skeptical of this.

Another option I have been discussing is flipping.  I have a partner that will do this with me but then the net profit comes in around $15000 generally.  Flipping houses is not as easy or as lucrative as they make it seem on TV.  (shocker I know)

I understand what you're saying as I sit on 7-8x that amount of debt 15 years from retirement.  Thankfully I weathered the storm and saw $100k in appreciation in the last year and rents are skyrocketing so everything but the vacation rental is cash flowing nicely.  

 

[pantherclub]

I understand what you're saying as I sit on 7-8x that amount of debt 15 years from retirement.  Thankfully I weathered the storm and saw $100k in appreciation in the last year and rents are skyrocketing so everything but the vacation rental is cash flowing nicely.  

That works out nice.  Thats great about the appreciation but that really doesnt help in the short term in knocking down the equity line.  Unless you want to sell (which could be an option if the price is right) but then you are back to square one per se

 

[BassNBrew]

I do a lot of work myself.  Build decks, stuff like that.   If I needed to reconfigure a room or add a bathroom etc then I have a couple of guys I can use.  Not worried about the renovating just looking for the sweet price point deal on a foreclosure or whatever.  If the margins are razor thin then I keep on looking.  Not worth the risk.

If i had this type of cash on hand and experience and knowledge that I know now in 2008 I would be about 8 steps ahead of the game.  Cannot imagine the insane deals folks got in 08-10 when the bottom fell out

I tell myself that at least once a week.  Then the reality kicks in that I wouldn't have gotten a loan even with 50% down back then.

I'm not seeing many deals out there.  It's it's a deal right now, there's a reason.  In many neighborhoods renovating is a losing proposition given the current home shortage because the un-renovated properties are drawing long term owners that will spend more on Dump + Renovation then they would on a Renovated Property.

 

[BassNBrew]

That works out nice.  Thats great about the appreciation but that really doesnt help in the short term in knocking down the equity line.  Unless you want to sell (which could be an option if the price is right) but then you are back to square one per se

Yup...sometimes I feel like a hamster on the wheel.  Keep your eye on the long term prize.  If it was easy, everyone would be doing it.

 

[pantherclub]

Yup...sometimes I feel like a hamster on the wheel.  Keep your eye on the long term prize.  If it was easy, everyone would be doing it.

I feel like everyone is doing it or at least trying it.  That's why houses are being bought sight unseen in a lot of areas.