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How to Retire with Real Estate and Negotiate Your Loans

by California Digital News

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It’s not too late to retire with real estate, EVEN if you’re just getting started in your late fifties or have NO experience investing. On this Seeing Greene, David gives his take on what someone with no rentals (or real estate at all) can do with their retirement accounts to successfully retire on real estate. But maybe you have a bit more experience or aren’t such a late starter. Don’t worry, we’ve got plenty for you too.

We’re back as David takes investing questions directly from listeners just like you. In this Seeing Greene episode, a house hacker asks whether he should take out a HELOC or hard money loan to get his next deal done. A late starter wonders what she can do to retire with real estate, even with zero experience investing. David shows YOU how to negotiate with your lender to get a better rate or term on your home loan and use “portfolio architecture” to put your “lazy” equity to work so you build wealth faster!

Want to ask David a question? If so, submit your question here so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums and ask other investors their take, or follow David on Instagram to see when he’s going live so you can jump on a live Q&A and get your question answered on the spot!

David:
This is the BiggerPockets Podcast show 892. What’s going on everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast here today with a Seeing Greene episode where we arm you with the information that you need to start building long-term wealth through real estate today. In today’s show, I’m going to be taking questions from you, the BiggerPockets community about the conundrums, the debacle, and the quintessential problems that you’re having with your portfolio and doing my best to give my advice for how you can improve your situation, better spend your money, better manage the asset that you’ve got and more.
Today, we’ve got some pretty awesome topics, including how to understand financial energy when it’s stored in your properties, seeing your properties as a piece of a portfolio, a concept that I call portfolio architecture and how to make that work for your wealth. What happens when you’re divorced and starting late, but you want real estate assets in your portfolio, as well as negotiating more favorable terms on a commercial construction project and more from you all. But most importantly, if you want to be featured on the show, head over to biggerpockets.com/david and submit your question to be featured on Seeing Greene and remember to let me know if you’re watching this on YouTube, in the comments, what you thought of today’s show.
Up first, we’ve got Justin in Virginia Beach trying to figure out what to do with his house hack condo. Let’s see what Justin needs some help with.

Justin:
Hey, David. My name’s Justin from Virginia Beach. I have a money question for you. So I have about $40,000 cash on hand. I have a house that I bought two years ago. I’ve been house hacking. I bought it for 225. It’s worth around 310, 320, so I was wondering if it would be smart if I did a HELOC and combine the cash on hand to do a BRRRR or a flip or if I should get a hard money loan and just use the cash I have on hand to do either of those two. I am a real estate agent as well, so I do have MLS access. So please let me know what you think would be best.

David:
Justin. Awesome, my man. This is some good stuff. So I see in my notes that you bought a condo two years ago and you’ve been house hacking ever since. Basically, you own the property and you only have to pay the HOA fee. So you’re paying about 280 bucks a month and all the rest of it is being covered by the income coming in from the people living in your house hack. So well done eliminating your biggest expense in life, which is housing. And it sounds like you’ve been saving that money that you used to spend on either rent or a mortgage and you got 40 grand of it put away and you’re trying to figure out what to do with it and you’re looking at BRRRR. So we’re trying to figure out how are we going to come up with the money to do it.
I do like the idea of taking a HELOC on this property as opposed to taking out an additional hard money loan, and here’s why. The rate’s going to be a lot cheaper and it’s also more flexible to pay back. So for anyone that’s not aware of how HELOCs work, they’re really cool products in the flexibility that you have. If you take out a hard money loan, there’s usually prepayment penalties and there’s more than just the interest that you’re paying on that hard money loan. So everybody knows, hey, you’re going to have a 12% rate or a 10% rate, probably closer to 13 or 14% with today’s rates, but you’re also going to have points that you pay upfront for the loan. You’re also going to have to pay closing costs, title fees, escrow fees, making sure that all the stuff is recorded properly. There’s always these little paper cuts that add up to be pretty significant expenses when you go forward with the hard money loan.
With most HELOCs, you pay for an appraisal and that’s it. You pull the money out and when you want to pay it back, you just pay it back. It’s really an easy and convenient way to move equity from one location to another location, and that’s what I love about your HELOC options. I’d rather see you take a HELOC on that property and add it with the $40,000 that you have saved up and that can become the down payment for the next property that you buy. Now, you’re going to have to get a loan for that next property. That might be a hard money loan because you’re probably going to be putting 20% down, maybe 25% down on it, maybe even 30, and you’re going to have to borrow the other 70 to 80%. So in that case, maybe a hard money loan. But what I’d love to see you do Justin, is repeat what you did with this condo.
If you move out of the condo and you rent out the room that you’re currently in, not only will you be saving that 280 bucks because now you’re getting more rent, but you’re probably going to be cash flowing a little bit. Now, you buy a live in flip. So you move into a property. Ooh, I like this idea even more the more that I talk about it. Because you don’t have to put 20 or 30% down if you’re going to do the live in flip. You can get away with 5% down on a conventional loan, which you might not even need to use the HELOC for because you got 40 grand saved up and you could take that HELOC and make that your emergency reserves in case something goes wrong and you have to pull that money out. But assuming nothing goes wrong, you’re not even going to have to spend any interest to use that money.
So you take your 40 grand, that becomes a down payment for your next property. You get yourself a fixer upper, you move into it, you put some roommates in there, and then you start fixing it up on your timeline. Maybe you hire people to come in and do the work, maybe you do some of the work yourself, but you see where I’m going here? You’re eliminating a lot of your expenses that are involved with flips or BRRRRs when you buy the property and move into it because you could do it on your time. The holding costs aren’t the same. You’re also eliminating a lot of the stress and you’re also eliminating the big down payment. These are all things that make flipping and BRRRRing tricky. You’re getting rid of them by taking the live-in flip approach.
Now, like you said, as a realtor, you have MLS access, so you could just make this a part of your morning routine. You wake up, you stretch, you scratch your cat on the head, you pour yourself some coffee, you read the news, you do your affirmations, you check biggerpockets.com and you look on the MLS to see if any fixer uppers have hit the market. You can also set a filter on there to remind you when a property has sat for 60 days or 70 days without getting taken off and going pending. Those are properties that are usually in rough shape and you can get a better deal with, and then you just wait. You’re in no rush. You got a great situation going right now, so you got the odds in your favor. It’s kind of like being a poker player sitting on a big stack of money. You only have to play the best hands. You’re not forced to play that 7-2 combination because you got to make some moves in life because you put yourself in a bad spot.
So use that to your advantage. Don’t go after anything that’s not a great deal. Don’t make any big mistakes and spend money on dumb things. Don’t get a hard money loan to buy a property if you don’t have to. Get pre-approved to get a conventional loan to buy something that can be a live-in flip and eliminate a lot of the risk that other investors have to take on when they can’t take the live-in flip approach. Thanks very much for the question. This was one that I enjoyed answering. Let us know how that goes.
All right, we got a great question coming up here about someone who’s late to the game in real estate, coming out of divorce, isn’t quite sure how the game should be played, but knows that they need to do something and they’re concerned about risks, but they also have to make some moves. We’re going to be getting into how to navigate that type of complex situation right after this quick break.
All right, welcome back. Let’s dive into our next question coming from Shelly in Jackson Hole, Wyoming. Shelly says, “I know I need to diversify my assets as none of them include real estate. I’ve never bought a house by myself, but I have owned two with my ex who got everything when I divorced him three years ago. I walked away with about 1.5 million in retirement assets. I’m interested in house flipping or short-term rentals, but I feel that a multifamily would give me a steadier return. However, I’m nervous about spending any of my retirement money since I’m 57 and slowing down. Also, I cannot touch it until I’m 59 and a half, which is two years away. My question is, since I’m older, have a health issue and I’m late to the game, what kind of market and what type of building should I focus on? Can you give me any advice on how to proceed with financing?”
All right, Shelly, this is some good stuff. Let’s talk about what you do have going for you and how we can use this to your advantage. You mentioned you have 1.5 million in retirement assets and you did mention that some of this money you can’t touch till you’re 59 and a half, which is two years away, which would lead me to believe that this is retirement income. Here’s what I’d like to see with you. The pressure’s going to be that you got to buy something, you’re going to have to find some way to get some income coming in in retirement. You’re not probably just going to be able to live on that 1.5 million assuming that you’re going to have a longer lifespan, which we’re all hoping for here.
So you’re going to have to invest it, but you want to avoid risk. And with real estate, risk comes in several ways. One would be buying in rough areas, that’s risky. Two would be buying an asset you don’t understand, that’s not having knowledge or not having experience. And a third would be the mortgage. The debt you have on the property constitute risk because it’s basically just something that slows down your ability to make a profit. So if a property generates net income through rents, vacancy can kill that, maintenance issues can kill that, problems with the property themselves can kill that, but that mortgage shows up every single month and that slows you down. What if we were able to buy you some real estate that didn’t have a mortgage? Now, you’re going to be able to get into the game. You’re going to be buying an asset that presumably is going to be going up in value over the long term, but if we can eliminate your risk by having you buy it with cash or very low money down if you had to, I’m starting to feel a lot better about this deal.
Now, I understand that you’re considering multifamily because you think it would give you a steadier return. My concern is that a lot of the income that comes from small multifamily properties like two, three and four unit stuff goes back into small multifamily properties like two, three and four unit stuff. Oftentimes, the tenants break things, the house itself wears down. You have to replace the roof, you have to replace one of the HVAC systems. Remember, when you have a fourplex, you’ve got four air conditioning units, you’ve got four kitchens, you’ve got four water heaters, you’ve got a lot more things that can go wrong, and I have one of these things and it seems like it’s always popping up in my inbox that another thing broke on that property and I forget. It’s because there’s four times as many things. And since maintenance and things breaking are one of your biggest expenses in real estate, if you go that route and you buy small multifamily, even if it’s paid off, it may feel safer, but it may not generate enough cashflow to actually support you in retirement.
That brings us into the short-term rental space, which can seem risky, but depending on the area that you buy into, there are going to be areas that have lot less risk than others. Buying into an area that is known for having vacation properties, the entire area is dependent on tourism and people visiting significantly reduce your risk of the city coming in and saying that you can’t have a short-term rental. Almost eliminates it. And it also significantly reduces how bad of vacancy issues you’re going to have because this is an area known for tourism. In other words, if you try to buy a short-term rental somewhere in Cincinnati, Ohio and you just hope that there’s enough people visiting Cincinnati to rent your unit over somebody else’s, you’re rolling the dice a little bit. But if you go into a vacation destination area like Orlando where you have Disney World or the Smoky Mountains where I have a bunch of cabins, the odds of you not having someone that’s going to rent your property at all are very, very low, and so it becomes less risky even though it’s a short-term rental.
Now what happens if we put this all together? You get into a short-term rental instead of a small multifamily because it’s going to produce enough income to make it worth your while. You buy it with cash so you don’t have a mortgage so that your risk is significantly decreased and you buy it in an area that is known for having a steady stream of tourism to reduce your amount of vacancy. Now, you might not get the deal of the century, but the goal here, setting you up for retirement is to get you base hits. We’re looking for singles, maybe doubles. We’re not looking to hit home runs and possibly strike out.
So here’s what I’d like to see you do. Pick a market that is known for having vacation rentals with very reliable and consistent income. Find an asset that is kind of boring and very steady and dependable. That’s something that I can help you with if it’s a market that I know because I know some of those neighborhoods and then have somebody manage it for you, which you should have plenty of revenue to do because you are not going to be paying that mortgage. You might even be able to buy two properties with that 1.5 million. You might even be able to buy two properties with just 1 million of it, right? You’ve got some options here. You should definitely talk to somebody who owns properties there and ask them who they’re using and how you can get set up with them.
Here’s my last piece of advice. Do not assume that all property managers are the same. I’ve had many bad experiences hiring other people to manage my properties who then delegated the work to virtual assistants or people working in their company that were not doing a good job and my revenue has crashed. I recently took over a lot of these properties myself, gave them to somebody that I hired and that one move, taking them away from professional property management and bringing them in-house has increased my top line revenue by 25% and we’re barely getting started.
The point here is don’t just pick anyone and think that they’re okay. Use someone you know who’s managing one or two properties in that area and doing a great job that can take on yours or vet the company very, very carefully and have a contract written so you can get out of it if the property’s not performing. The last thing that I want is for you to spend a lot of money buying properties in cash, handing them to property management and getting a disappointing statement every single month with some excuse that they’re always going to give you. And because you don’t have experience in real estate, you’re assuming that what they’re telling you is the truth. You’re going to end up feeling hopeless and that’s what we want to avoid.
Now, you also mentioned here any advice on how to proceed with financing. Let’s say that you want to buy two cabins in the Smoky Mountains and they’re about $700,000 each, but you don’t want to put all of your money into buying them cash. So maybe you want to take out a loan on each cabin and you want to borrow 25% of the money for the property. So in this case, you would be buying the cabin for $700,000 and putting down right around $180,000, $200,000 on each cabin. You’re still going to keep that mortgage really low, but there’ll be some kind of financing. You can use what we call a DSCR loan. That stands for Debt-Service Coverage Ratio. These are 30-year loans with fixed rates that will qualify you for the loan based on the income that the cabin is going to be generating.
Now, if you buy in an area with a lot of other properties, high tourism area, this will be easier to get the loan because there’s tons of comps for an appraiser to look at and feel comfortable that this cabin or this property is going to bring in the income that you need to pay for it. And most importantly, you are not going to have to worry about having your own debt to income looked at because they’re not going to be using your debt to income ratio. They’re going to be using what they think that the property is going to be producing.
All right, our next question is coming from Tyler Judd in Williams Lake, British Columbia.

Tyler:
Hey David, Tyler Judd here in Williams Lake. We’re a small town in Central British Columbia up on the West Coast of Canada. My wife and I have a number of small multifamily properties and a small apartment complex commercial building. We’ve got a single family home that’s an ongoing BRRRR, should be done in the next month or two, converting it into having a legalized basement suite, and I’m looking for a little bit of guidance on how we might negotiate with the lenders. My wife and I are in healthcare, so we’ve got strong personal incomes and I’m wanting to maximize that cash on cash return, kind of restocking our cash reserves as we’re continuing to look for opportunities in the market.
Details on the property. We purchased it in December for 280,000. Renovation and holding costs will be 120,000, all in for 400,000. ARV will be about 475. And so we’ve been offered from our local credit union, 80% of the acquisition and construction costs for 320,000 and that’ll be a commercial loan, 5.5% on a five-year term, amortized over 25 years, PITI is 2,650. Or through a mortgage broker, we’ve been offered a residential loan from one of our big banks up here in Canada. They’ll do 80% of the ARV at 6.25% over five-year term with 25-year amortization with the PITI at 3,150. It’ll end up being a furnished midterm rental. We’ve signed a one-year contract with a corporate tenant for 3,250 a month for that upper unit, and we’ll get about 1,750 for the basement, consistent with the other units that we have in the area, bringing our income to about $5,000 a month.
We’re confident in the property and the location for the next five or maybe 10 years. So I’m wanting to ask your advice on how to approach the lender at that credit union to possibly improve the terms on that commercial/construction loan. The credit union also has our commercial mortgage on that apartment building in a few of our small multi-families, so they’re able to see how we do financially and they like how we do business in general. So thanks in advance, David. You and the rest of the BP team have been wildly influential, so we appreciate you and thanks again.

David:
All right, thank you Tyler. I appreciate that, especially that last part about the mindset stuff, helping your business. Though I do believe that real estate builds wealth better than anything else and we love educating real estate investors around here, I’m also a businessman and I’ve found that you can create significant wealth through running businesses like me, providing services to real estate investors. So I love hearing that your business is doing better based off of some of the content that you’ve got from me and BiggerPockets. Thank you for sharing that. That made me feel good.
All right, I heard all the details there, very thorough. I see that you’re probably a doctor or in some form of medicine. Your main question was, how can you approach the credit union about improving the conditions and the terms of the loan that they’re offering you? I don’t know that my first option would be to try to get them to improve those. The first thing that I would do, Tyler, is I would look for someone else that had better ones. The easiest way to do that is from finding a mortgage broker. So there’s basically two kinds of lenders. There’s lenders who say, “Hey, I work for this company or this fund or this bank and I lend out their money, and these are the terms that we have to give you a loan.” Or you can work for someone who says, “I’m a broker. I broker your deal to a lot of different banks. Tell me what you’re looking to do and let me go to all the banks that I have a relationship with and see who’s got the best deal for you.”
I typically recommend people start with mortgage brokers going to these different lenders to shop for them so you don’t have to do all the work. If you find a mortgage broker, they can shop it for you. See if you can get better terms there than with your credit union, and then you don’t have to worry about any of this. You can just use them. For instance, at the one brokerage, we broker these types of loans all the time. We call them bridge products, and we find ways that you can borrow, just like you said, 80 to 85% of the down payment and the construction costs for the property, so you only have to put 15% down on the property and 15% down of the construction costs. You could borrow the rest of it. That might be better than the loan that your credit union’s giving you or the rates might be way better at the credit union than what anybody else can give you, but how are you going to know that if you don’t have something to compare it to?
Now, once you’ve looked around, if you’re finding that the credit union is still the best game in town, which sometimes they are, you might feel better about the terms they’re offering you. Lastly, if you don’t, I would just go in there and I would talk to loan officer and I’d say, “Hey, I’d like to use you because I have a relationship with your bank. I just think that the terms could be improved a little bit. How would you feel about lowering the interest rate or lowering the closing costs or having the points that I’m paying up front? Where do you have the most flexibility with improving these terms so that we can sign this thing today?” That’s going to let you know how interested they are in your business because this is something people don’t understand about banks and credit unions. They’re not always in this situation where they’re competing for your business. Sometimes they don’t want it.
If they haven’t had a lot of deposits or if they’ve recently loaned out a large amount of the capital that they’ve collected on deposit from all of their customers, they don’t want to make loans to people like you because they don’t have as much money to lend. In those situations, the head honchos at the bank say, “Hey, if you’re going to make loans like this, you need to jack up the rate and jack up the points because we don’t need that business.” Now sometimes they’re in the opposite position. Sometimes they’ve got a bunch of deposits that have come in and they’re paying out interest on all the people who have made those deposits and they’re under pressure to get that money lent out at a higher spread so that they can make the delta. You’re never going to know until you talk to the person at the credit union and find out what position they’re in.
Now, they’re probably not going to come forward and tell you if they’re motivated or not, but if you make a proposal to them and say, what do we have to do to get this signed today and they don’t seem interested in it, that’s a good sign that they’re not feeling the pressure. If you can tell the person you’re talking to really, really, really wants to get that loan signed, he’s probably going to give you some form of, “Let me go talk to my manager,” which is a great sign that you’ve got leverage. There’s a little negotiating tip for you, a courtesy of Seeing Greene.
One last thing to think about, Tyler, if you haven’t considered this, you may not need to take a loan from the credit union or maybe you can borrow half the money since you don’t love the terms by taking out a HELOC on one of your other properties. So you might be able to save some money by putting a HELOC on something else and using that for a portion of the construction costs instead of just going to the credit union to borrow the money from them.
If you’ve got paid off properties, you can look into cross collateralizing them, meaning, hey, put the loan on this property instead of on the one that I’m going to buy. It’s all collateral to the lender. It really shouldn’t make a difference, but oftentimes if you’re putting a loan on a property that’s already stabilized, you get a much better rate than a hard money loan where you’re going to be going into a construction process. So think about if you’re going to be borrowing money on a property that is risky, meaning you’re going to be going to improve it, they’re going to charge you for that risk and give you a higher rate. But if you put the loan on a property that is stabilized and less risky for them, meaning if they had to foreclose on it, they could sell it easier, they’re going to have less risk and therefore give you a better rate. But from your position, you just want to get the money. It probably doesn’t make a big difference whether it’s collateralized with something that’s stabilized or something that’s unstable like the fixture that you’re talking about.
All right, the green light is shining and we are on a roll. We’re actually going to skip the section where we normally read comments from the YouTube channel and the review, so sorry if that’s your favorite part. It will be in the next episode of Seeing Greene, I promise. But because we’re having such good content, I’m going to keep rolling right through. Right after this break, we’re going to be getting into a great question from Alex who bought a primary residence and did very well with it and is trying to figure out the best use of the asset. We’ll get into that right after this quick break.
All right, welcome back. Let’s take a look at this next video question from Alex in Seattle, Washington.

Alex:
Hi, David. My name is Alex from Seattle, Washington. My wife and I started as real estate investors and a part of other few properties, rental properties. We have this primary residence, which we converted into rental last year. We purchased it in 2018 and refinance it for 2.6%. Our return on equity currently is very low, about 4%, and we are trying to find a way on how to make it work better. Cash-out refinance won’t work because of higher rates and it won’t cash flow with that and at all, or even negative cashflow, and also I know we can sell it tax-free because we lived there for more than two years during previous five years. We can sell it, but it did not appreciate well, only to 765K versus 720 when we purchased it. And yeah, what do you think our best next options with this equity? Our goal is long-term investment and make sure our equity works well. Thank you.

David:
All right, thank you, Alex. In Pillars of Wealth, I talk a lot about the framework that I like to look at equity through. I see equity as energy. It’s financial energy and it’s the name for financial energy when it is stored in real estate. Now, you don’t have as much flexibility with it when you have cash in the bank that you can pull out very easily or cash under your mattress that you can pull out very easily. There’s more things that you can do with that energy. So one of the things that real estate investors should be looking at is seeing the architecture of their entire portfolio and asking themselves, where is my equity working hard and where is it being lazy? Now, in this case, it sounds like you’ve got some lazy equity, which sounds bad, but it’s actually a great problem to have because it means you can improve the performance of your finances.
Condos typically are not strong cash flowing vehicles. Now, a lot of people will hear that and say, “Wait a minute, my condo cash flows.” I know. I believe that it does. However, it’s probably not cash flowing as strong as if that same equity was in a duplex, a triplex, a fourplex, a single family home, a short-term rental, an apartment complex, a commercial building, something that is designed to generate more income. Condos are inefficient. They’ve usually got high HOA fees. The rents on them don’t go up as much as on single family houses or duplexes or triplexes. So they’re great ways to get into the game because they’re typically cheaper and they do appreciate, much like single family houses. So I look at these as sort of launching pads. If you buy a condo in the right area and you play the game the right way, you can get a lot of equity really quickly.
This happens when people buy a new development in an area like Miami, or if you bought a condo in Austin five or six years ago, you’re probably feeling really good about it, but the return on your equity, my guess is not that great. So Alex, you’re probably going to want to sell it, which is one of the ways that you get your equity out of one real estate vehicle and into a better one, and you already recognize that you get to avoid capital gains taxes because you lived in the property. So I don’t even have to tell you about that, you already know. If you’re married, which you are, you get to avoid about $500,000 in gain. If you’re single, it’s about $250,000. So you can probably sell this property, you’re going to have some realtor fees, you’re going to have some closing costs, you might have some seller credits, but you should sell the property and move it into a better vehicle.
Now, my advice would be to sell it in the spring because you typically get significantly more for your property if you get more offers and you have a lot more buyers that are shopping in the spring than in the winter, and then the question becomes, where are you going to live? Why you’re looking for something else? So you may have to move in with some friends. You may have to rent a unit from somebody else. You may have to find a medium term rental to move into, or you may have to go lease another home. I typically tell the clients that come to the David Greene team, I don’t want you to lease an entire house for a year and then have to break your lease when you go somewhere else. So look on Furnished Finder for something that you can move into for a couple of months to live in while you’re looking for your next property.
You’re also going to want to get pre-approved to know what type of loan you get, what your interest rate is going to be, or a range that you could be in and what your budget’s going to be when you buy the next house, because you’re going to need to know the expenses in order to run the numbers on your next property. Remember, running the numbers is about knowing income and expenses. You need the expenses by starting with the lender, and then you can grab the income from looking at AirDNA, from looking at Furnished Finder, or from looking at the BiggerPockets rent estimator if it’s going to be a single family house.
Once you’re armed with this information, you can start asking yourself the question of, where do I want to put the money? Maybe you save some of it and put 5% down on a house hack for you and your wife and start over with another situation like the condo where you buy into a neighborhood that’s going to appreciate and in five years you get to this whole thing again with the equity that you created. Maybe you take the rest of the cash and you buy yourself a couple short-term rentals. Maybe you buy a couple small multifamily properties. Maybe you get into the commercial space if that’s what you want to do. But the idea here is to get the equity out of the condo where it’s acting lazy and put it into the market where you’re going to do better.
Now, here’s something to think about that works in this market right now that we typically haven’t preached at BiggerPockets, but I think it’s a good strategy. Let’s say you can’t find anything that’s a screaming deal that you love, but it’s in a good neighborhood or a great neighborhood, a good location, it’s not going to cause you any headaches and you know it’s going to perform over time. It just doesn’t cashflow right now. Well, remember, it just doesn’t cashflow right now typically means it just doesn’t cashflow at 20% down right now.
You mentioned in the notes here that you don’t need the equity because you got some money saved up. So what if you sold the property and you took the equity and you just bought something all cash? Maybe you buy a short-term rental somewhere, all cash. Now, you have enough money that you can pay somebody else to manage that property, or you can learn how to manage it yourself and make some mistakes because your risk is significantly reduced when you don’t have the mortgage payment. You’re now making cashflow that nobody else can get because you don’t have a mortgage on the property, but you’ve got all the equity. Remember, equity is energy stored in the property. And later on, if you do find a good deal, you can go do a cash-out refinance on that property, pull the equity out, and put that into the next deal, which is another way of getting the energy out of the investment vehicle.
When we’re having a hard time finding cashflow, that doesn’t mean you can’t buy real estate, it just means it’s harder to buy real estate using leverage. So all you investors out there that have got this problem, a lot of equity, a lot of savings but nowhere to put it, break yourself out of the mindset of looking at everything at putting 20% down. Think about it, if you pay cash, if you put 50% down, if you put 80% down, would that asset operate making you a cashflow and making you money? And then you’ve always got the option to pull that equity out later and go put it into the deal you find that makes more sense.
All right, in today’s show, we covered quite a few topics and financial principles including what return on equity is and how to use it, understanding financial energy stored in properties and how to get it out, seeing properties as a piece of a portfolio as opposed to a standalone unit, being divorced and starting late, but wanting to get into real estate to build your wealth and negotiating more favorable terms on a commercial construction project, as well as how banks make decisions when it comes to lending out their money.
Where else are you going to get stuff like this? Seeing Greene is the only game in town that I know of, so thank you for being here. I appreciate you all. But we can’t make the show without you, literally. So if you’d like to see the show keep happening, I need your help. Go to biggerpockets.com/david and submit your questions there. If you want to reach out to me to talk more about any of the things you heard in today’s show, you can find my information in the show notes. Please do that. And if you want more BiggerPockets content, head over to the forums on the website where I promise you there is more information than you will ever be able to consume if you looked at it for probably the rest of your life.
I’m David Greene, the host of the BiggerPockets Podcast. We are BiggerPockets and you are the people that we love the most. Thank you for being here, and if you’ve got a minute, check out another episode of Seeing Greene, and if you’re an extra awesome person and you just want to show off your awesomeness, please head over to wherever you listen to your podcast at and leave us a five star review. Those help tremendously. I’ll see you on the next episode.

 

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