New real estate investor

Lexington-Fayette, Kentucky
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New real estate investor

Michael Davis
Lexington, KY · Member since 2019 · 6 posts · 1 vote

Hello, looking for advice.

I have $100,000 in a HELOC secured. It is an adjustable interest only heloc for the first 15 years then switches to a 10 year fixed rate. Interest rate is 7%

My original thoughts were partner with a fellow agent who is actively doing flips with a small crew doing 2-3 flips per year. The pay structure agreement to him would be buyer agent fees, seller agent fees, and 50/50 for managing the flip. Does not take a salary or a percentage during the flip for managing. Pays the crew he has from the draw schedule.

Or...

Would it be in my benefit to buy 1-2 houses paying 20-25% down and using those houses for either mid term rentals or long term rentals? If I chose to buy (2) houses worth $200,000 each I would spend $80,000 in down payments alone.

$80,000 x (0.07/365) = 15.34 per day

$15.34 x 30 days = $460.27 per month back to the heloc not paying anything down on the principal of the heloc. 

I am trying to get into real estate investing I just don't want to get in over my head before I ever get started.

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  • Samuel Awosolu
    Lender · Florida / Georgia · Member since 2025 · 58 posts · 28 votes
    7mo

    Hey Michael,

    I just did something similar for an investor not too long ago. However he deployed his HELOC for a specific real estate strategy I won't discuss here.

    What I can tell you is  partnering on flips is risky. It seems like you are carrying most of the risk on the first deal based on how you presented the pay structure. Partnerships can work if you trust the fellow agent, they have a strong background for doing this and the margins are real. I would verify the numbers yourself. Not just take their word. Even if you are partnering with family I would do this. To me the downside of the first deal is you’re taking on the financing risk while someone else controls the execution. The upside is if there is plenty of margin, you can get a nice win if all other factors in executing go in your favor.

    Buying rentals can work too if cash flow is strong enough after your put away your reserves, CapEx and your HELOC interest is covered. However I would just buy one to preserve enough cushion should in case things go wrong. I would also look at multifamily like a duplex or quad. With a single family if you have a vacancy. You have to eat up the HELOC payment for that month. Short and Mid-Term rentals you have to factor in seasonal periods in your area, low bookings, etc. But ultimately covering your vacancy risk is less with multifamily.

    I sense you want to swing for the fences with this opportunity but the goal should be to stay in the game! Go in the direction that will support your HELOC payment comfortably with no stress. You will sleep so much better at night. Hope it works out for you. 
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  • Michael K GallagherBusiness Member
    Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
    7mo

    @Michael Davis welcome, and I know it was not an option you mentioned but I always encourage people to consider a house hack for the first one.  If you can logistically make it work its traditionally the lowest barrier to entry cost wise and allows you to learn how to manage and keep an eye on things in a market you already know and like.  

    [email protected]614-362-2231
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  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    7mo

    Depends - what are your strategic advantages and what are you bringing to the table. It can be smart to partner with experienced people but be careful.

    are you in a situation to house hack? that would be my first starting point.

    HELOCs can be great options but the flip side is that you're increasing leverage so if things go south, it'll be painful. 

    [email protected]
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  • Hiromi Gonzalez
    New to Real Estate · Orange County, CA · Member since 2026 · 40 posts · 28 votes
    7mo

    Hey Michael, I ran your Scenario B (two $200K rentals) through a quick model. Here's what it looks like per property:

    Income side: A 3-bed SFR in Lexington rents for roughly $1,750/mo right now. After 5% vacancy, that's $1,663/mo effective rent.

    Expense side (per property):

    • Mortgage on $160K at 7%: $1,064/mo
    • Property tax (~1% in Fayette Co): $167/mo
    • Insurance: $100/mo
    • Maintenance reserve (1%): $167/mo
    • HELOC interest on your $40K down payment (7%): $233/mo

    Total monthly cost: $1,731

    Net cash flow: -$68/mo per property. That's before any CapEx surprises.

    The part that jumps out: you mentioned wanting $200/mo positive cash flow per door. To hit that, you'd need rent of roughly $2,100/mo on a $200K house in Lexington and comps don't support that. The rent-to-price ratio here is about 0.00875, which is actually decent by national standards but still tight at 7% financing on both the mortgage and the HELOC.

    The HELOC cost is the killer. You're essentially paying 7% on your down payment on top of 7% on the mortgage. That double layer of 7% debt is hard to outrun with Lexington rents.

    What would need to change to hit your $200/mo target:

    • Buy at ~$155K instead of $200K (same rent), or
    • Find properties renting at $2,100+ (tough at this price point), or
    • Wait for rates to drop to ~5.5% (reduces mortgage by ~$150/mo)

    None of this means don't do it, it means go in knowing the real numbers. A lot of investors in this rate environment are subsidizing $50-100/mo per door and betting on appreciation + equity buildup. That can work, but it's a different strategy than the $200/mo cash flow goal you mentioned.

    On the flip partnership: that's a totally different risk/return profile so I won't muddy this with both, but happy to run those numbers too if you share the typical deal size and timeline.

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