New to Real Estate · Rogers, AR · Member since 2020 · 6 posts · 1 vote
Hello everyone! My wife and I are putting in action to get our real estate investing journey going and would greatly appreciate some advise for new investors. Our plan is to sell our current home which we have spent the last 3 years renovating here and there as a lot of it we've done ourselves. And the ROI will be greater if we were to sell vs rent in our area. I've heard a few times on the BP podcast that the market is predicted to decline in the coming months. Our property is not quite where we want it to be in terms of selling (mostly cosmetic, could be more desirable). Should we go ahead and finish what we had planned to do and hope that the market is still decent come spring or should we just button up the projects we are working on and list it while the market is up? Thanks in advance!
Omaha, NE · Member since 2020 · 612 posts · 665 votes
6y
What if you tried the hidden third option that gives you the best ROI and enables you to keep the house?
Seek out a bank, starting today, who will give you a HELOC on your current home. Any amount will do, but if you search diligently, you can actually find a bank that will give you what is known as a first position HELOC which assumes the entire house payment and loans you up to 75% or 80% loan to value.
If you find the first position HELOC and make sure to apply principle-only payments on the home through the fall and winter, using the HELOC itself to pay the interest portions, come spring, you'll have a significantly reduced debt burden (having changed nothing about your monthly payments), more credit open on the HELOC and the option to buy another property.
Rent the first, add its cashflow to the paydown of the HELOC and begin again.
The problem is, if you sell the home you're in now because of ROI, you'll lose momentum, equity, and leverage against recession. A recession is the best time to have rental property. Yes, the value of the property may take a temporary hit, but rent prices rarely fluctuate much, and even if rent tanks, you still have an extra stream of income. While everyone else is struggling, you with renters are quickly moving toward scooping up more real estate. Best of luck, whatever you choose!
Rental Property Investor · Member since 2019 · 304 posts · 462 votes
6y
I think you have to look at the bigger picture. First of all, are both of you dependent on income from a job? How secure are those jobs? Do you have sufficient reserves to weather a downturn in the economy? Although negotiating a HELOC is an option, you run the risk that the bank could cancel it. A better option might be to refinance and pull out the cash, to either add to your reserves if necessary, or use it to purchase another property.