I have a 120k HELOC and am looking to buy my first investment property. My goal is to acquire several multi-family properties over the next few years. I'm trying to figure out the best strategy. Does it make more sense to buy a property for say 70k outright and refi after 6 months and do it again or utilize the HELOC to fund down payments for several properties?
What are your long term real estate goals? Once you have your goals outlined you can determine what the best way to reach those goals are and how to best use your HELOC.
Generally speaking I wouldn't touch a 70,000 multi.
Unless it's true value was 100,000.
Hard to get money refi-ed out on small stuff.
long term I’m looking to build cash flow through rental properties. I’m curious if there is a preferred or tested strategy for utilizing a heloc like this
out of curiouity why wouldn’t you touch a multi in that price range? That seems to be around the average in the market I’m looking at
@Gary Marcus , in my opinion, using the HELOC and then refinancing would be more advantageous because you'd be operating as a cash buyer, which will give you more power. If the deal is good enough, you shouldn't have an issue refinancing, but the question will be how much the bank will allow you to pull out. Each set their own rules so just make sure you understand what their policies are on how much they would be willing to lend. Just because you pay 70k for a property that appraises at 100k does not mean you're guaranteed to receive 80k through the cash out refi
Mike, thank you for the advice. Could you expand on some of the advantages of being a cash buyer ?
No problem. The biggest advantages of being an all-cash buyer include being guaranteed to close the deal, and in a shorter window of time. If two offers are presented at the same price to the seller (let's say 70k in this example), and one has a financing contingency in the contract but the other is all cash, the seller will almost always go with all cash. This is because the non-cash offer will require the involvement of a bank, and banks will always need a minimum of 30 days to close a loan due to the nature of the underwriting process. If the property doesn't appraise at or above the agreed to purchase price, the deal may fall through unless the buyer is willing to bring money to closing to bridge the gap between what the bank will lend and what the seller is asking for. In this situation, the seller would be frustrated and would be forced to take the property out of contract, then place it back out on the market to find another buyer, and wait even longer to liquidate the asset.
Does that make sense? If you have any further questions or want to dive into more details, definitely feel free to PM me.