Posted by Michigan Andy on November 29, 2000 at 16:17:10:
Bill-
Thanks for the quick response, and I apologize for not getting back with you sooner. I would have done it via e-mail, but @home strikes again. Apparently, the have a nationwide e-mail outage.
Anyway, I considered the equity line of credit, and e-mailed Ed with details. I talked with a “small” local bank today, who told me that a ballpark interest rate is 13%. I guess that’s better than what I’m paying on my credit cards, and I like your approach - using it in future investments. Downside is that they will only go 70% LTV. If I were able to find someone to go 80% LTV, I would no longer have any “consumer” debt. So then I got to thinking about the creation of a second mortgage. I could market myself a much better interest rate, but the only downside there is future flexibility. Guess I’m gonna have to bust my butt to acquire some more properties in other ways.
I’m going to put you to task now. I have never done anything like this before. How does one go about creating a secondary note (please remember that this is a commercial note); and then how do I go about finding someone to buy it? Obviously, it would have to be at a large discount, as it is unseasoned. How big am I going to have to make this thing to handle my first challenge of eliminating my consumer debt, minus the investor’s discount?
I sincerely appreciate the time you are taking to at least pitch some ideas. I used to really stress out some years back over “money problems”. I don’t see them that way any more. I now see them as challenges. I make a good sum of money, both from my J-O-B, and through my REI dealings, but, as you know, income from tenants doesn’t show up on a credit report. I recently applied for 2 cell phones, as my contracts with another cellular carrier are about to expire. I got turned down!!! That, is a big part of my challenge! I make plenty more than enough to pay my bills, but again, the income doesn’t show. ARRRGGGHHHH!
Posted by Michigan Andy on November 24, 2000 at 18:22:34:
Hey, fellow creative thinkers!
I’m in a quandry. I just bought 2 5-units, that I refinanced another 5-unit to acquire with none of my own cash. Total deal was $199k financed (commercial loan) to cover all three properties. Appraised value, as of September 2000 is in neighborhood of $320k. They cash flow well. I carry too much consumer debt, mostly using credit cards for things that easily can/are being used primarily for business use. I am looking to pull about $30k out of these properties to eliminate large interest debt, and make it more manageble/tax deductible. I just finished a rehab about a month ago, and my credit score sucks because I carry too much credit card debt. Not late on payments, just carry high debt.
I hope I included enough details to get some wheels turning. My wife and I are veteran prison staff, and are looking to get out and just do our REI business, as it has been very good to us. Anyone with a potential solution, please e-mail me.
Lastly, I need to start making plans for the CRE convention next year. Unfortunately, I have to compete with other people for vacation time at my J-O-B. I need to know when, where, and all the other details.
ED!!! Puh-lease get with me. I am anxious to meet you and the rest of the gang here.
Posted by Ed Garcia on November 26, 2000 at 09:40:03:
Andy,
My suggestion is for you to go to a SMALL local Bank. You see they are not as dependent on credit scoring as other institutions, because they do their own do-diligence and portfolio the loan. They will see that your credit is good, other than the credit card debt, which you are going to have them to pay off.
Andy, you don’t tell us how long of a period of time has elapsed since you’ve done your acquisitions. However the bank may not be concerned about seasoning because of the abundance of equity and cash flow of the properties. Banks aren’t dumb, they know that the VALUE is there. If the bank wanted too, they could just give you a credit line for $30,000.
While you are at this small bank, take the opportunity to develop a relationship. This bank can be instrumental in future dealings.
Posted by BillW. on November 26, 2000 at 08:36:20:
Andy,
Why don’t you create a second mortgage on the properties and sell it to an investor? The interestrate should be lower and also should be deductable.
You could try and get an equity line of credit with a lender on the properties. Use it to pay off credit cards as well as for future purchases for the REI business. Also, it’s deductable, I believe.
Good luck, …BillW