Good evening I need some input from you good people.
I am just getting started in REI.
Scenario : I own my home thinking about selling to pull out equity about 70k net after sale to use for investment. 20k to a investor in a great market giving 20% return in 3-4 months. The rest to start flipping to gain capital and brrrr to gain long term capital.
Question is should rent out my home, mortgage is 1000. Rental potential 1500. Move to a rental , or buy a new home as primary.
Or stay in my home and start looking for a investment property and maybe access a heloc for cash.
Thanks for you input
Hello Faruq! None of these are bad ideas. I do question you giving the 20k to an investor for 20% return. What is that investment involve? You didn't say where you are from. Are houses appreciating quickly where you are at? If so you have to consider that before selling as well. You are only going to have about 50k left over after giving the other investor 20k. How/where are you going to be flipping with 50k? These are all answers I would need to know before giving my opinion.
Thanks for the response Jon. The investment for 20k is a promissory note on a project in a city with high values on fixer uppers. I am in Raleigh n.c housing appreciation is steady but not booming. It’s a great sellers market in this area right now but I fear that that market will turn with in the next few years and that equity might not be available then. And the 50k left over will be savings available for any carrying cost that a loan would not cover.
@Faruq Mcallister I think it is going to be a personal decision for you. Personally I leverage the equity in my Primary through a HELOC (as well as other financing strategies) to BRRRR deals. But at the end of the day it's going to be a personal decision based on your situation and investment strategy. I will tell you that the money through HELOCs is cheap right now and tax free so it is a preferred leverage tool of mine. Write out all your options and make the best decision for you. Best of luck!
Personally, I would leverage your current home in any preferred way such as HELOC or refinance as much as possible, Buy and renovate a duplex or similar 3br/2ba home if you are comfortable doing so (maybe partner with someone with some experience), and use most of your available liquidity to invest in multiple other homes. In the Raleigh/Durham area, you can get into another house for every $25-40k you have available. As it sounds like you are newer, I would work with someone that does this kind of thing in the area on 2-3 projects and learn how they do it and how you can get the most out of your money here.
I am growing my rehab/rental company in Durham and mainly invest on the east side of Durham myself. I acquire each of my projects for less than $30k out of pocket and either flip them or rent them based on the outcome numbers. If you ever want to have coffee and talk through your situation and I can share the experiences I have had thus far in the area I am always looking for new local contacts and someone to share information/contractors/opportunities and learn anything you have learned in the area as well.