Posted by David Krulac on November 22, 2007 at 20:44:29:
another CU?
I’ve belonged to many over the years. I think that you could join the aforementioned one if you owned property in the six county area and coincidentally I have property for sale in that six county area.
I like your suggestion of WAMU, I haven’t used them but somepeople i know have and are pleased.
Wells Fargo, Greenpoint, Suntrust, EMC, ASC, BoA, Chase, Irving and Sovereign will lend NOO for people with 20+ mortgages. There another one something like Ameritrust or Amerimortgage, also that I can’t think of their right name.
Investment Home - $110,000 Payoff Balance @ 5.75% Interest
Investment Home - $120,000 Payoff Balance @ 7% Interest
What should I do?
Wait until I sell one of my investment homes (Has alot of equity), so I can pay off my primary which would be great because of homestead protection. However, it will take 2-3 years before I think I can sell it because the market.
Pay off Investment Home with balance of $120K at 7% interest, but then I would only have 12K left.
Save for a raining day, you never know what opportunity will come up or if we go through a depression.
The highest and best return on investment is generally marketing and advertising. If you are in your own small business (real estate is a small business), you will get the best bang trying to make the phone ring.
Save some for a rainy day. Buying houses without money is easy, but if you have negative cash flow and no cash reserve you will get into trouble.
Re: What to do with 132K Savings - Posted by Anne_ND
Posted by Anne_ND on November 21, 2007 at 11:46:21:
Anon,
My general answer to your question would be to let a couple of bankers take you to lunch or coffee (bankers from smaller banks would be better) and discuss with them what they could do for you in return for parking your funds in their bank. You should also offer to have your monthly payments from rental properties deposited in their bank.
You are trying to find someone who will lend you money against your funds- either a LOC or mortgages against new properties. Tell them you will use the money to buy assets that will cashflow.
What those assets are will depend on you. I would buy mobile homes or mobile home notes, something that gives me a healthy return on my funds (at least 20%), with an eye to eventually buying a commercial property like a multiplex, MH park or self-storage. You want to build a relationship with the banker, and a smart banker (you might want to speak with someone in the commercial side of things) will jump all over someone who looks like they can grow their money.
The other job of a smart banker would be to put you in touch with other customers who are looking for a good investment. Finding private money so that you can go even bigger is incredibly valuable. You might want to think about buying a portfolio of rentals or something commercial- all without touching your capital.
Re: What to do with 132K Savings - Posted by Rich-CA
Posted by Rich-CA on November 20, 2007 at 20:47:08:
I would diversify the investment. Some I would use to expand my RE holdings buy obtaining heavily discounted properties and turning them into rentals. Some I would use for market investments. In the recent past, some I invested into a venture capital fund (can you say 700% returns in 4 years). Be wary, the particular stocks and funds I invested in are in an industry where I worked for 2 decades, so I had some familiarity with the reputations of those I was backing.
Posted by David Krulac on November 20, 2007 at 17:39:28:
SFH starts and permits hits 16 year LOW.
reason # 5 Builders aren’t building new stuff, which decreases the supply of housing, while the population grows increasing demand. right now that means more renters for your rental houses.
Posted by David Krulac on November 20, 2007 at 17:32:10:
Today is the best buyers market since 1981. I know I was buying real estate in 1981 also.
This IS the perfect storm:
Interest rates are still very low, one of the lowest periods in the last 40 years.
The sub-prime flap and all the negative publicity is keeping buyers on the sidelines. get off the sidelines and get in the game!
Sure, there are sellers with high expectations, expectations beyond what is reasonable. I talked to a realtor just yesterday who is listing a property right across the street from a property of mine. His asking price, dictated by the out of state and out of touch seller, according to his agent is higher than the all time high for the street, neighborhood and town. And i told the agent so; also adding that my property was for sale 25% LESS the the market high and I welcomed his overpriced listing which just made my property look all that much better. Its such a great deal, I might buy it… Oh yea, I already own it. The point is that there are ALWAYS sellers in good markets and bad, who have to sell. and those are the ones you need to talk to. In a buyer’s market like today, the sellers who are negotiable, flexible, realistic and under pressure will be selling their properties and the other sellers won’t
so this is a perfect storm, low interest rates, buyer’s market, sellers who ahve to sell.
I’m buying and so should you.
Forget paying off debt (good debt that is).
Forget about savings accounts and similar vehicles.
Buying and holding quality real estate will make you wealth. you can thank me when you’re wealth. Gratuities accepted.
I’m in AZ, and the median home prices here is about 280K, not 10K if i’m understanding you right. Yes, I could fly to different parts of the Country but I would rather invest west of Texas. CA, NV, AZ, UT, and TX are all near the 200 - 300K for starter SFR 1200 - 1800 SQFT in the major cities.
I thought there are several counties in TX that are pretty similar to my market, but I could be wrong.
Seems to be that everyone is saying to buy rentals ATM.
I had several conversations yesterday about this very thing - basically that the prices where I am will
never be this low again and that no one with any common sense could argue otherwise. Sure, in 3 years
it’ll be much better, but then all the great deals will have been bought.
I don’t know of many investors in my home state to rent out properties that cost over $200,000. Most of my clients have rental properties that they scooped up for under $150,000. Don’t believe me? Go to www.HAR.com which is the Houston Association of Realtor’s site. Search for single family homes between $80,000-$120,000 with this criteria: 3 bedrooms, 2 bathrooms and 2 car garage. You will find so many of them. These rent closer to the 1% or more of the property value than homes that are $150,000 and up. In Houston or Dallas, you go for homes in this range or you’ll be eating the mortgage when your property is vacant. Our property values are nowhere near AZ or CA. You can get a 2,000+ sq ft home built in 2003, 4 bedrooms for $125,000 (even less if you negotiate)! Go to www.HAR.com and look up this address: 910 Garden Land. You have to be kidding me to go after $200,000-$300,000 properties to rent in the Houston market. If you have a $300,000 home and it’s vacant, your vacancy is 100%. If I have 3 $100,000 homes and one is vacant, my vacancy is 33%. Which situation would you rather be in? Another thing, it is 1,000 times easier to lease a $100,000 home in Houston than it is for a $300,000 home. Call any agent and ask them!!!
I agree with David. Don’t pay off good debt. The IRC allows you to save on income taxes with depreciation and interest on your rental properties. Here’s what I know and these are 2 of my clients.
Investor A: mid 60’s, owns 40+ homes free and clear, $195,000+ AGI on tax return, $50,000+ income taxes, last 3 tax returns have similar figures
Investor B: late 30’s, owns 90+ homes all with mortgages, -$600,000 AGI (but really earns over $400,000/year), $0 Income Taxes, last 3 tax returns have similar figures
How come one pays no income tax (deferred) and one pays about 25%? When you pay off good debt, you’re giving yourself a double wammy! Less cash reserves in the bank and less tax advantages.
Find a good CPA, Estate Planner, and/or Real Estate Attorney to help you understand the money game. Whatever you do, don’t pay off good debt!!!
Thanks for all the info guys, but I was just wondering how does someone own 90+ Homes all with mortgages? I was once a loan officer, and once you hit over the five homes, it gets much tougher to get a loan.
Each lender would finance a certain number of properties outside of FNMA guidelines. For example, before the wholesale mortgage shutdowns this year, Greenpoint allowed 4-10 properties, World Savings allowed an unlimited amount of properties up to a certain percent of the portfolio, etc. There are many lenders out there and each don’t mind financing a certain percent or certain number of properties of the total portfolio. Aurora was a good lender. Some of them closed their operations or changed their guidelines but there are still plenty of lenders out there. It just depends on who your loan officer is.
I left the mortgage industry about a year and a half ago so I don’t know too much about which lenders are best for non-owner occupied properties. What I do know is that in America, you can finance pretty much whatever you want if you’re qualified!
Posted by David Krulac on November 21, 2007 at 07:33:45:
you can have 10 FNMA type secondary marketable mortages per person. (not 5)
if married your spouce can have 10 mortgages also.
there are still plenty of non-secondary mortages available (portfolio loans) in the market place if you have decent credit. Just settled once last week 97% financing NO PMI, 7% interest fixed for 3 years then adjustable 1% per year max, 30 year term. Not too shabby. It was an institutional bak mortage not sold on the secondary market.
4 assupmtions, subject to, contract for deed, seller financing, lease purchase, lease option, private lenders and hard money loans, open up many other possibilities.
Its possible to have 90 mortgages, without even going to #4 above.
Re: What to do with 132K Savings - Posted by John Corey
Posted by John Corey on November 21, 2007 at 03:43:04:
You must have been a residential loan officer.
Two solutions for larger portfolios.
Find a lender who does not have a cap at 5 or 10 mortgages.
Portfolio lenders. Not common but they exist.
The normal route for serious investors with larger portfolios is a
commercial facility from the commercial side of the bank. LTV, DSCR,
interest rate and term will all be different from residential NOO
mortgages.
As to the initial question.
Savings is good in uncertain times. If you feel there is risk to your job
or other issues that will cause a cash flow issue having more cash is
good.
It is also a time when you can find bargains from distressed sellers.
Hence having cash that you hold until you get a screaming good deal
makes sense. Keeping your present debt in place is fine as it is more
likely you could not replace it if you really needed to get access to
cash.
Sit on the cash for now.
Put out the word that you have cash and are ready to deal when
someone is really pressed to sell. Maybe buy and hold where you
refinance to little to no cash is left in the deal. Or buy and flip. Buy at
50 cents on the dollar and sell quickly for 60 cents so deeply
discounted deals.
Leave the debt in place but keep some cash for servicing the debt
when the rentals go vacant. Keep them rented even if that means
dropping the rent the next time they are vacant. Cash flow is very
important in uncertain times.
Posted by Dave T on November 22, 2007 at 16:59:39:
For the past few years, I have been using a portfolio lender where I live. Unfortunately, this bank was acquired by a larger bank who only does conforming loans, so, my source has dried up until I establish a new relationship.
Two years ago, Washington Mutual would give an investor 20 loans or $2 million in aggregate loan debt, whichever came first. I don’t know is they have changed their guidelines since I last did any business with them.