RE Beginner - What Should I Do Next?
I want to generate cash flow with the possiblity of appreciation. I don't have any trouble doing slight rehab work or simple repairs.
I've purchased a SFH (bank owned forclosure) with an uncle of mine 2 years ago for 60K +10K repairs and sold it for 120K 8 months later. My uncle wanted to hold onto it a little longer but since it was my first investment property i wanted to get out as fast as possible. I now realize that i should have held it for at least a year. i plan to do that in the furure. I could probably invest more with my uncle but the properties are about 1.5 hours away and I would like to do something closer to home.
Currently i have a 130k HELOC on my primary residence and am looking to invest it in RE. I have been looking for multi-unit homes, duplexes, small aptartments. I also have a friend that is looking to invest in real estate as well that could probably come up with the same amount of money. Any suggestions? I am about 1 hour north of Philly.
Thanks in advance
Certainly if you can find properties nearer to you, you may be more comfortable. I am not sure what the issue is with the 1.5 hour drive. If you are doing the rehab yourself, then the drive could be tedious. If you are concerned about management then 1.5 hours should not be much of a problem.
Using a HELOC is a good idea for acquiring properties. It is a relatively cheap source of available money for acquisitions. What you might consider is to repeat what you did with your uncle using your HELOC. When the rehab is complete, then refi the property and pay down the HELOC and repeat.
I would be doing part of tthe rehab myself, paint, flooring, simple repars. my uncle has a guy for major repairs that is very reasonable.
i used a heloc when i did this house and it worked out great. it is also good that i only need to pay the interest if need be.
" then refi the property and pay down the HELOC and repeat" could you explain a little more? do you mean pay it down with rental income?
what do you think about taking a heloc on a house purchased with a heloc?
thanks!
I believe in multi-leveraging, no problem with doing a heloc on something bought with a heloc. And I assume you mean you are financing not paying cash for these properties? I use a heloc to put money down but try to get 90-95% financing to leverage my personal heloc money as much as possible.
So you made $50k on that one deal? That's great, now just think if you can get 5 of those deals going at once...
GL
[addsig]
i am not sure how much financing i would be able to get right now. my income to debt ratio is pretty high, and i have a lot of open credit. (credit score is very good though)
I would like to use the heloc to purchase (like cash). But to buy multi units i think i will need about 300K. So financing or a partner woulf be neccesary. Or maybe i just look in the below 100 price range like the last one.
I am just not sure if its worth trying to get financing/mortgage/partner just to get into MU RE.
50 / 2 (split profits with uncle) in ended up with about 25K.
Even if you get 90%, which is pretty darn easy, you can then close on many more properties at once than paying cash for one or two at a time and waiting to refi them. Just my opinion, I don't concentrate on flipping, I hold long-term for the time being
[addsig]
do many people use heloc as a down payment only? If this is the case with 10% down i could theoretically purchase 3 300K homes, with about 40K left over in the heloc. obviously this isn't taking into account closing costs and other fees, but still would be pretty good.
I'll have to look into this a little more.
larbin,
I was assuming that you would buy the property outright with your HELOC. The one you did with your uncle cost $70K and you have a $130K HELOC. If the after repair value is $120K then you should be able to refi at least $70K to pay off the HELOC. Now you have a property that you can rent out to cover the refi and you have acquired a rental property with "net no money down". Repeat to acquire more properties!
Regards,
Ed
this makes a lot more sense. thanks for the info.
when i get a mortgage on the fixed up house. how do i use that financing to pay off the heloc on my primary home? would mortgage company just pay off the heloc at closing?
Larbin, you can also ask for a certain percentage back at closing, I ask for 6% back. So, finance at 90-95%, ask for 6% back, use Heloc for needed down.
larbin,
When you refi the rehabbed house you will get a check ( most likely from the Title Company). The HELOC on your primary residence is not tied to your rehab. You then can pay off your HELOC out of the proceeds from the re-fi. If you refi for more than your HELOC amount, then you will have some cash left over.