What should be my next move?

18 Replies

Afternoon Biggerpocket friends and memebers,

Here is my situation. I bought my first investment property with all my capital. So its free and clear. I bought it for $15k put $15k into it so im at $30. House that have compareable comps have been selling for $55.Im renting for $650 a mnth. So im trying to get capital back by getting a cash out on it, but no one is wanting to do cash out on that low of a loan. What there telling me is to pull a line of credit on my primary thats worth $110k and my primary is free and clear also. Should i make that next move? My thoughts were well im a beginner at this so what am i going to do with $80-$90k? Should i use it to buy another free and clear investment or should i spread the money out and use it as 20% down on 3-4 investment properties? Should I stop wasting time trying to cash out a low loan and just pull a heloc on my primary? What should I do?

Thanks in advance

@Carlos Alvarado only you can answer this one. You clearly understand the difference in the two options. Will either one of these cause you to lose sleep? If not, the leveraged option, (putting 20-25% down and financing the rest) is the mathematical answer to the question of which is better. But that's just math. You know which way will allow you to sleep better, we dont'?

Me, I'm a strategist and I have no problem sleeping well while using leverage to maximize my ROI. I sleep well knowing that my money and my credit are working for me while I sleep like a baby!

lol, nice! Good way of putting it Robert. I just want to be able to grow my business. I like the 20% down also. So lets say for example i buy 3-4 and i use my 20% down and finance the rest. What happens when i run out of my heloc money? I do i create a snowball affect for more properties? So i can sleep like a baby to..lol

Have you tried a smaller bank for a refi?

LOL! You've got it Carlos! That's exactly what I called it when I explained it to one of my good friends yesterday! THE SNOWBALL OF WEALTH! You get a private lender or two and when you learn to buy properties at deep discounts, you will be able to make money when you cash out refi them! Then you just keep rolling the snowball and it keeps growing!

Thanks Robert. You've been very helpful. I will keep.you posted on my success. Have a blessed day!

Hey Nate thanks for response ive tried about 10 small banks and about 2-3 mortgage companies and they wont do anything under $50k.

A good strategy would be to buy one or two more, with cash, then go to a bank and do a "blanket" loan. Assume you have 4 properties each worth $50k, so a total value of $200k. (hopefully, you paid 30k each for them)

Now you can go to a local regional bank, and get a blanket loan on all 4 for a combined amount of $150k. (75% LTV).

My dad is doing this very thing in Indiana right now. He had same issues you did, until he came across one lender that suggested a blanket loan. He was able to "refinance" with cash out.

Hope this helps,


Thanks Brian. That is very helpful. Im gonna try that. I will keep you posted on my success. Thanks again

@Brian Wall would you please share the place your dad used? I am shopping for the exact thing right now. Thanks a lot in advance and I live there as well.

@Carlos Alvarado I've found local credit unions and small State banks that are willing to do small loans. In addition, the credit union will do a blanket loan to help bring the loan amount up as well.

With your situation, and if you're up for it, I would get that HELOC and use some to put down on more cash flowing props and the rest to loan out to local investors as transaction funds and earn some good returns on the banks 2% APR HELOC money you get. Again, this is just me, but I'm fine maxing out leverage in today's market to grab everything I can at these current prices.

I've mentioned in another post that I use OPM to buy the homes for cash and then refi with the local small banks. This gives me 75% of appraised value vs. 75% of the purchase price. In the end, I have "no money down" on all of my properties by using this method.

I hope that helps.

Hey Carlos - I'm on the other side of DFW from you. Along the lines of what Shawn was saying, could you get another property for $30k? If so, perhaps a HELOC for the $30k and then use the FCF from both of your investment properties to pay off the HELOC. Once you've done that, lather, rinse, repeat. That way, you're not highly leveraged.

According to Bankrate, you could potentially get a 4% HELOC if your credit is good. That would be a $303.74 payment for a 10 year term. Your net profit from the rentals, using the 50% rule, would be $650/month. If you could throw that at the HELOC, you'd have it paid off in 4 years, 3 months. If you could throw an extra $650 a month from your other sources of income, you could pay it off in 2 years.

Even if something doesn't work out, as long as you're comfortable with that HELOC payment, it seems like this approach would be a low-risk way to use a little leverage to build your portfolio. As the portfolio grows, it should take less and less time to pay off a HELOC. Once you get to the point where the portfolio throws off enough FCF to pay off a house in a year, don't use the HELOC. Instead, save up the money from the properties to buy another one with case. That's what we do, and while you want to be doing deals all the time, the reality is that if you can get to the point where you're buying a rental property with the numbers like you're getting once a year, you're going to be in a great position!

wow! Great advice. Thank you Jason. Hey where do u buy ur materials for ur properties. Give me a call when ur available. 214-431-8546 Carlos

Hey, Carlos--

I don't do a lot of buying myself. My property manager and her contractors handle it. Most of the time, the receipts come from Lowe's or Home Depot. If a contractor has a good in with a supplier, then he'll use that one, but I can't point you to a place where you can get sweet deals on drywall or lumber or anything. Sorry!

I work at Lowes, so i was going to try to take care of you. I work at the Pro Service Desk. But thanks again for your advice

Gotcha. Yeah, next time I have a big renovation project, I'll let you know - that's a very kind offer! We're in the process of getting a writ of possession right now on my last purchase, so who knows what we'll find once we get occupancy.

Always work to get your funding in place. It's best to have multiple options(more than one bank or lender) so you can choose.. My portfolio is a combination of free/clear and financed...I'm careful about leverage...

Thanks Rolanda. Im going to keep that in mind. This is all great advice.

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