What will be my best move?

Question

I pulled the equity out of my primary (70k) to use as down payment for my 2nd rental property, my finance guy wants me to get a HELOC to have available just in case, I have since had to change jobs so have to wait till paystubs are available to reflect income. I have to go with a bank that will do 90% on LTV which i have found is not easy to find. I personally don't think i need the HELOC, I refinanced to a hight interest rate to pull the equity, so this money is sitting since March as i go through the changes in life and work life just to get a HeLOC.  I could pay off my investment property with this money but feel i would not be leveraging my debt, doing a HELOC on non primary residences are non existent, i cannot refinance into an even higher interest rate... not smart. I am considering purchasing a turnkey out of state,  interested in STR, mid term ..... i also want to wait and see how far the market will fall, .....

Robert Collins · Answer

Hey Ama,

Deciding on your best move depends on several factors and your personal goals. Here are a few considerations based on the information you provided:

• Evaluate your financial situation: Assess your current income stability, expenses, and financial goals. Determine if you have sufficient reserves to cover unexpected expenses or vacancies without relying on a HELOC.
• Assess the cost and benefits of a HELOC: Consider the interest rates, fees, and terms associated with obtaining a HELOC. Evaluate whether the potential benefits of having additional available funds outweigh the costs and potential risks.
• Review your investment options: Explore different investment opportunities, such as purchasing a turnkey property out of state for short-term rentals (STR) or mid-term rentals. Conduct thorough research on the potential returns, market demand, and associated risks of these investments. Keep in mind that STR investments may have additional considerations, such as local regulations and management requirements.
• Monitor the market: If you're considering waiting to see how far the market will fall, it's important to stay informed about real estate trends and market conditions in the areas of interest. While predicting market movements is challenging, gathering data and insights from local experts or real estate professionals can help inform your decision.
• Consider paying off investment property: If you have the option to pay off your investment property with the equity you pulled from your primary residence, evaluate the potential benefits of reducing your debt and owning the property outright. This could provide cash flow stability and eliminate mortgage payments on that property.
• Seek professional advice: Consult with a financial advisor, real estate agent, or investment specialist who can review your specific situation and provide personalized guidance based on your goals, risk tolerance, and market conditions.

Remember, each investment decision comes with its own set of risks and rewards. It's essential to carefully weigh your options, consider your long-term goals, and make an informed decision that aligns with your financial circumstances and risk tolerance.

I hope this helps :)

Account Closed · Answer

Just curious but the market is on fire this year, would the $70k not have been making more in the retirement account?  My money is earning more in interest right now than most people make on running full blown rental businesses.  I would not be interested in taking on loans in this economy right now but that is just me.

Ama Taylor · Answer

Thank you!