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Byron Paille
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Own 2 homes free and clear wanting to scale.

Byron Paille
Posted May 1 2024, 20:50

I currently own 2 homes free and clear. One older I bought at an auction  and a new build. I have a large lot and approval to build a duplex. I am done spending my money and am looking to scale. 

Do yall do a refi for this or get a heloc? With rates at this level I an not sure places will cash flow at 80% loan value. 

One home is worth 125k and new build is hitting the 230-250k mark.

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Jason Wray
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Jason Wray
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Replied May 1 2024, 21:47

Byron,

My advice is go the Cash out refinance route for a few reasons. One - Heloc rates are very high right now in most cases 9.50 to 12% and are usually over 10-15 years. A cash out refinance is set up on a 30 year mortgage so it offers a lower payment and rate. A Heloc is a debt burden and add an extra tradeline to your credit which can cause higher DTI and excessive trade lines can drop scores.

A heloc can "Never" be used as an "Asset" or for PITI reserves when buying another property which is required. Cash out refinance puts the cash into your hands and money is power and it can be kept in a savings or another interest earning account to offset the mortgage rate. Helocs are also much harder to get on an investment property versus a COR.

If you ever have any question feel free to reach out I am always happy to talk REI!

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Robert Ellis
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Robert Ellis
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Replied May 2 2024, 04:39
Quote from @Byron Paille:

I currently own 2 homes free and clear. One older I bought at an auction  and a new build. I have a large lot and approval to build a duplex. I am done spending my money and am looking to scale. 

Do yall do a refi for this or get a heloc? With rates at this level I an not sure places will cash flow at 80% loan value. 

One home is worth 125k and new build is hitting the 230-250k mark.


 build new multifamily in zoning friendly places. I have dallas investors who invest here because they can get urban core deals within 1 mile of downtown in adjacent neighborhoods and land is 50k for an infill lot here in columbus compared to idk what it is in dallas 

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AJ Exner
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AJ Exner
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Replied May 2 2024, 06:59
Quote from @Byron Paille:

I currently own 2 homes free and clear. One older I bought at an auction  and a new build. I have a large lot and approval to build a duplex. I am done spending my money and am looking to scale. 

Do yall do a refi for this or get a heloc? With rates at this level I an not sure places will cash flow at 80% loan value. 

One home is worth 125k and new build is hitting the 230-250k mark.


Hey Byron,

So the advantage of doing Refi compared to a HELOC is that the heloc is personally backed to some degree while a DSCR refi is backed by the (hopefully) cash-flowing asset. Especially if you don't refinance at maximum leverage and do 60-70%, it optimizes rate and terms, while still getting you the cash you need.

I hope that helps, happy to assist where I can.

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Byron Paille
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Byron Paille
Replied May 2 2024, 07:23

Ok refinance is the better option. It comes down to cash flow. I'm looking to scale now that there 2 units. What do yall consider the minimum cash flow on your deals. I like all people would like to get it all but we know it is not possible.

What do yall want to get for cash flow per door to see a deal as good? Right now with rates I appears for around $400 a month CF I can onlyndo 60-70% cash flow.

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Replied May 2 2024, 08:07

Hi Byron! I'd go the DSCR route! DSCR loans are typically for income-producing properties, whereas HELOC's are used for personal expenses or home improvements. If the intention is to refinance an investment property, a DSCR loan will be more appropriate. They are evaluated based on the property's income and ability to cover the loan payments, rather than the borrowers personal income. This can be beneficial for borrowers who may not have a steady personal income but have a property-generating rental income. DSCR loans may also offer more favorable rates and terms. How soon are you looking to refinance? DSCR loans will need 25-30 days to close.

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River Sava#1 Real Estate Deal Analysis & Advice Contributor
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River Sava#1 Real Estate Deal Analysis & Advice Contributor
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Replied May 2 2024, 08:20

Hi Byron -

Sounds like a DSCR cash-out refinance is preferable over a HELOC in your scenario. DSCR loans primarily evaluate the property for loan approval which is favorable when looking at investment properties. Generally speaking, HELOCs are more suited for personal expenses or home improvements.

Also, keep in mind that most lenders right now are capping at 75% LTV for a cash out refinance, not 80% LTV. What is your timeline for this?

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Tanner Lewis
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Tanner Lewis
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Replied May 2 2024, 09:14
Quote from @Byron Paille:

I currently own 2 homes free and clear. One older I bought at an auction  and a new build. I have a large lot and approval to build a duplex. I am done spending my money and am looking to scale. 

Do yall do a refi for this or get a heloc? With rates at this level I an not sure places will cash flow at 80% loan value. 

One home is worth 125k and new build is hitting the 230-250k mark.

I would cash out refinance with a DSCR loan. You don't have to do 80% LTV, you can do less. Just leverage enough so your cash flow is comfortable.

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Bruce Lynn#2 Real Estate Agent Contributor
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Bruce Lynn#2 Real Estate Agent Contributor
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Replied May 2 2024, 10:44

They're both rented and occupied right?

You are right they may not cash flow at 80%, but you don't have to take 80%, maybe take 70 or 60%.  Don't leverage to the max, be conservative.

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Byron Paille
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Byron Paille
Replied May 2 2024, 11:52
Quote from @Bruce Lynn:

They're both rented and occupied right?

You are right they may not cash flow at 80%, but you don't have to take 80%, maybe take 70 or 60%.  Don't leverage to the max, be conservative.

One is rented the other is in Final stages of build. People leaving notes and messages to get into it daily. I only need around 60% of the new builds value to build the duplex.

What is the DSCR interest rates verses your average refi?


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James Hamling#3 Investor Mindset Contributor
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James Hamling#3 Investor Mindset Contributor
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Replied May 2 2024, 13:32
Quote from @Byron Paille:

I currently own 2 homes free and clear. One older I bought at an auction  and a new build. I have a large lot and approval to build a duplex. I am done spending my money and am looking to scale. 

Do yall do a refi for this or get a heloc? With rates at this level I an not sure places will cash flow at 80% loan value. 

One home is worth 125k and new build is hitting the 230-250k mark.


In position your in, why would you want to go and get goofy trading equity for EXPENSIVE-$ ???? 

The smart direction; I'd be buying on terms. Why not get yourself 5% or better vs cutting in the "bank". Seriously, F-the-bank! You cut em out of your life, why cut em in now???? 

Use that equity to tap-into PRIVATE $, win-win. Do you know anywhere else a person can get a SECURED, guaranteed 4/5% right now?     Private $ is UBER risk adverse, or else they'd be playing the market themselves. Different strokes for different folks. 

And, you can frame it like a HELOC, at about half the price.

Then buy on terms, C4D, get that better rate than what banks will "allow" all the way through. 

There is better ways, then the basic ways. F-the-bank! 

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John Morgan
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John Morgan
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Replied May 2 2024, 14:57

Cash out refi at an LTV that still cash flows a little. So maybe 70% LTV? This is what I did with my first two rentals that were paid off. I was able to scale up to 27 SFR by doing this and recycling equity im properties over the last 9 years to scale up. Good luck!

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Michael Sloan
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Michael Sloan
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Replied May 2 2024, 18:56

@Byron Paille cash flow equals control. As long as you can hold onto the property you can continue to get the appreciation, principal pay down, tax benefits etc. If you max out the loan and something goes wrong you risk losing the property. If you do a cash out refi, you don’t have to go to 80% ltv and probably shouldn’t. Keep the payment at a level where the property will still cash flow.

Lot of good strategies with a heloc but I prefer to lock in the costs with a fixed rate loan and know what I m going to be paying. Even if you have to pay a little more interest while you find your next deal

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