Re: I’m going to disagree with everyone… - Posted by Marcos
Posted by Marcos on March 02, 2002 at 07:57:53:
Yes, the expenses were a little out of the ordinary. But, they were unfortunately unavoidable. Which is what would have killed someone without any cash.
You say: “First of all - if your ultimate goal is to achieve a nice cash flow to live and prosper from why would you want to sell a cash cow?”
What Cash Cow are you speaking of? As far as I can tell, he can rent it out and probably get 300-400 cash a month. It’s not exactly my version of a cash cow. I think his ability to do deals is what presents him with a good cash cow. Should he just sit on his equity and wait for the rental income to make him rich? He doesn’t have any cash, and bad credit. How exactly does he do another deal if he doesn’t liquidate this property?
You Say:“60k in cash reserves a slam dunk for hard money? I don’t think so. This person does not have cash reserves - only the ability to convert equity into cash. When that is done no hard money lender would be interested in taking a third position to little or no equitable interest.”
I advised that he sell his rehab, and take the cash out. So, I don’t know what third position you’re talking about. He uses hard money to purchase another property. If he can show he has 60k in the bank and he’s borrowing 40k the hard money lender will find a way to get the deal done. He might require him to put a years worth of payments in reserve. But the truth is a HML would prefer experience coupled with cash. And can overlook some minor credit blemishes.
The excessive repair I had to do was to correct a slab leak. I had to have a house repiped that had no crawl space and no roof space either. I had to move the tenants to a motel, they had to jackhammer all the floors and lay new plumbing. It was not cheap. Not by any stretch of the imagination. No other way to do it unfortunately.
Now, one very good point you made was about getting the equity as a HELOC. Now that is right, I didn’t even think about that one when I posted yesterday. Seeing as how I just got a HELOC at prime, and an intro rate of 3% for one year. I should have.
I contend that he can generate cash from doing these rehabs, he has already proven himself capable of that. I secondly contend straight rentals of SFH’s are usually not very good at cash flow. Lease/Options, Wraps, etc are much better vehicles for that. And for Wealth Acumulation I think you can use SFH rentals combined with multis.
My point of my post was that this gentleman appeared to need primarily a good chunk of cash. Cash flow of 300-500 doesn’t help him at this stage in the game. But, if you put $60,000 of available cash in front of him, and position him to where he is assured of his next 3 deals, then he’s in a good position.
My question to you is, if he holds onto this property, and he doesn’t sell. And let’s assume he doesn’t have good credit. And he rents and pulls in $500 a month. How is he going to do his next deal? Where is he going to get the cash, and how is he going to get approved?
This is just my opinion, and I definitely respect yours even though I disagree.