As a new real estate investor, is 100% borrowing risky?

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As a new real estate investor, is 100% borrowing risky?

Md Kamrul Huda
Member since 2019 · 3 posts · 0 votes

Since I don't have cash and I lost my job. I want to borrow from HELOC for down payment and want to borrow the rest amount from lander to invest on 10 single family residential properties to generate $1500 per month cash flow in Charlotte Metro area. Please advise whether it is too risky in current market conditions with approx. 7.5% interest rates. Thanks in advance.

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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
1y

Yes borrowing with no reserves, skin in the game, and no stable source of income is very risky. 

Have you planned for the risks? What if your homes don't appraise? What if you cannot payoff the HELOC? What if you cannot secure a tenant on time?

I don't want to be the negative Nancy, but you should consider multiple exit strategies before taking on huge debt and potentially ruining your credit.  

[email protected]818-269-7983
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  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1y

    Yes borrowing with no reserves, skin in the game, and no stable source of income is very risky. 

    Have you planned for the risks? What if your homes don't appraise? What if you cannot payoff the HELOC? What if you cannot secure a tenant on time?

    I don't want to be the negative Nancy, but you should consider multiple exit strategies before taking on huge debt and potentially ruining your credit.  

    [email protected]818-269-7983
    LuxePrivate Investments LLC 570 Reviews
    WebsiteView Page
    3Reply
  • Payton HaightBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2021 · 124 posts · 86 votes
    1y

    Hello, I am sorry to hear that you lost your job. I do not know your exact situation or experience, but in general I would advise against borrowing from your HELOC so you can 100% finance properties as a newer investor, without having a job or cash as a safeguard. You would be putting not only the investment properties but your primary residence at risk if you run in to any issues, which will almost certainly come up. If you were an experienced investor and had really good opportunities that could pay off the HELOC then MAYBE that could make sense.

    Do you have experience with renovations? Perhaps flipping or some shorter term strategy might make sense to help you build up a cash position.

    [email protected]380-324-0445
    1Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    1y

    So if the average tenant pays every month, nothing breaks and they all stay a year. 10 out of 12 months you’ll be missing 1 rent and have turnover costs. So if your rent is $1,500 you’ll end up with $3,000/yr cashflow. Minus 10x turnover costs. If it costs $300 for each turnover (I’d expect $500) you’ll have cashflow of exactly ZERO. Again, assuming everyone pays and nothing breaks. :-)

    2Reply
  • Caleb Brown
    Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
    1y

    Very risky and a terrible idea in any market cycle. I would first get consistent income and cash before thinking about buying 10 single family homes. 

    2Reply
  • JooYung Choi
    Realtor · NJ · Member since 2023 · 215 posts · 99 votes
    1y

    I agree with the other posts here. It is very risky to leverage yourself into 10 single family homes. Vacancy and Repairs could cost you more than $1,500 a month. Not only will you be liable for the PITI on the properties, you also have to think about paying back your HELOC as well.

    I would say start with one and then get your systems down first. Once you have a model that works and can easily replicate, you would have more direction on how to better invest the rest of your money. 

    1Reply
  • Eric Gerakos
    Investor · Costa Mesa, CA · Member since 2016 · 1k+ posts · 1k+ votes
    1y

    Why 10 homes? Collect money, not properties. 

    1Reply
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