To HELOC or not to HELOC, that is the question

[Aaron Teitelbaum]

Hi Everyone,

I'm relatively new to the real estate investing world, and I'd like to get started on my real estate investing journey as soon as possible. I currently own a single family home and can extract ~ 160K in equity via a HELOC. The question is whether I should utilize most of this equity for a downpayment on a MF home (typically 3-family homes are around 450-500K in my area)? I'm concerned about my HELOC exit strategy as the cash flow will likely cover the HELOC interest and maybe a little of the principle, but it seems I would be paying back the HELOC over a long period of time. Should I just be using a HELOC to cover some short term expeneses? Use the HELOC for cheaper duplex homes or SFHs? Use hard money for the BRRRR method? Keep on saving money from my job for the downpayment on MF properties? Any additional investing strategies and advice that you can recommend for someone just starting out? Thank you, much appreciated!

-Aaron

[Nicholas L.]

@Aaron Teitelbaum

should you use a HELOC for a down payment and then try to pay it back just like a mortgage?

in general, no - i highly doubt the property would support this level of debt service, and i suspect you'd be substantially negative each month.

Use the HELOC for cheaper duplex homes or SFHs?

again, probably not - i just don't see them supporting 100+% leverage.  interest rates are too high.

Use hard money for the BRRRR method? 

...maybe? are you able to source BRRRR-able deals, and do you have the time to manage one? I just finished a very modest BRRRR - was tough to find the right property, tough to find contractors and handymen, etc. did i mention it was tough?

Keep on saving money from my job for the downpayment on MF properties?

keep on saving money?  definitely.  down payment on MF properties?  maybe - small, medium, large?  is that what you're interested in?