1031 vs LOC vs Hard money

2 Replies

I own a property that is paid off and has a value around 160k and has a cashflow if about $600/month.

My goal is to increase my monthly cashflow by leveraging that property. So far the ways that I thought of were the following:

1031: I would potentially be able to turn this one property into doing 3 deals that have a cashflow of 300-400 each at 20% down. Or I could get into a multi unit property at 20% which would probably cashflow around $1500

LOC: I’ve found that Wells Fargo will do a Line of Credit of about 70% LTV with the property being the collateral with a 9% interest rate with a balloon. In this scenario I would continue to receive the $600/month cashflow from the property and have about $100k to do the BRRRR strategy with. I don’t have a lot of experience with rehab and it seems a bit daunting, but by using this strategy I could continually grow my portfolio.

Hard money: by using the property as collateral I could work with a local hard money lender in order to do about the same strategy as above.

I’m a newbie just trying to understand the pros and cons of each and be sure I’m not missing any aspects of the opportunities. Any feedback is appreciated.

Personally I like the LOC approach. No time constraints like a 1031 and why get rid of the property if it is performing for you. I would also not take hard money at a high cost when you can get cheap money via the LOC. Just use it as the down payment to keep as much reserved as possible. If you buy right and make smart improvements you might be able to get that down payment back out via a refinance in a year or so.

That’s a strategy that I hadn’t thought of. I think that’s a great idea.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here