My investment plan. Need someone to review it

12 Replies

I am in Seattle area. Here's what I have. 500k in cash, a paid off single family rental property that I plan to take out a HELOC of , est 700k limit. I plan to use the cash I have for down payments to buy multifamily units. Meanwhile using the money from heloc as my short term loan. Making sure I buy properties at ~75% of the ARV. After repairs and putting tenants in, I'll refinance and hopefully paid off my HELOC and then do it all over again. Can anyone tell me if this is a good idea, or areas for improvements

Sounds like a good plan. Where do you plan to buy multifamily units?

Are you buying in cities near to the Seattle area because you are going to manage the properties yourself? Have you already found the bank to give you a HELOC for the paid off single family rental property?

Well, your BRRR plan sounds good, hope you find a good realtor. If you know you are going to need a property manager one day, might as well check out Olympia, Spokane, etc. other places with good cash flow but that you don't want to drive out to. But yeah, starting with Tacoma, Lakewood, close by sounds good. I got a HELOC from Penfed this summer, the rate is 6.5%.

I'm new to all this so if this is a dumb question, please forgive me: what's the advantage of HELOC over a cash out refinance? I found that cash out refi's have a much better rate.

@Jeffrey M.

A HELOC is a revolving line of credit whereas a cash out refinance is only a one-time lump sum amount of cash. Additionally, your credit should not be dinged on a HELOC until you pull from your available balance whereas with a refinance, once you apply for it, you will see a hit on your credit score.

Originally posted by @Jeffrey M. :

I'm new to all this so if this is a dumb question, please forgive me: what's the advantage of HELOC over a cash out refinance? I found that cash out refi's have a much better rate.

HELOC typically have variable interest rates that usually climb with the prime rate so you can potentially get into a bind with a large balance if interest rates begin to rise rapidly (seems unlikely in the immediate future). They're also revolving and essentially act like a credit card allowing you to draw on them and pay off with flexibility. Note that cash out refis having lower rates that are locked but you also pay closing costs which can be 2-4% of the balance.

Originally posted by @Hon Ching Lai :

I am in Seattle area. Here's what I have. 500k in cash, a paid off single family rental property that I plan to take out a HELOC of , est 700k limit. I plan to use the cash I have for down payments to buy multifamily units. Meanwhile using the money from heloc as my short term loan. Making sure I buy properties at ~75% of the ARV. After repairs and putting tenants in, I'll refinance and hopefully paid off my HELOC and then do it all over again. Can anyone tell me if this is a good idea, or areas for improvements

Sounds like a good plan and you’re in a fantastic cash position which provides flexibility. There are important details missing - for example, what is your ultimate goal with investing and by when do you want to achieve these goals? Beginning with the end in mind will dictate how your strategy is executed.