Is this a good plan for a newbie?

OP

Rental Property Investor · Member since 2021 · 24 posts · 25 votes

5y

@Justin Phillips thank you! I'll definitely look more into the first position HELOC.

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Zeke ListonBusiness Member

Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes

5y

Originally posted by @Lilah Johnson:

Hello all. I'd appreciate some guidance or validation in my plan below. I am a first-time investor that has been researching my butt off for the past few months and am very appreciative of this forum. So much information and resources!

I'm pulling the trigger and getting started in real estate investing after reading all that I can get my hands on and educating myself.

I have saved about 40-50K to use as a downpayment on, hopefully, two three-unit or quadriplexes in the Ohio area. These would be buy and hold.

I'm currently in the process of taking out a Heloc on my primary residence of up to 100K that I just want to have at my disposal until I have saved enough cashflow from those properties to support any repairs, vacancies, etc.

I then plan to reach out to banks in the Ohio area to get preapproved for a mortgage so I can have that on hand.

Afterwards, I will reach out to agents and property managers in the area to find properties.

Am I on the right track? Any ideas or advice would be appreciated.

Hi Lilah, that sounds like a good plan. What part of Ohio do you plan on investing in? Best of luck!

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OP

Rental Property Investor · Member since 2021 · 24 posts · 25 votes

5y

@Zeke Liston Hello. I'm looking at Cleveland and possibly Toledo at the moment.

[email protected]614-665-5793

Drew Cheezum

Columbus, OH · Member since 2021 · 46 posts · 67 votes

5y

Hi Lilah, I think that sounds like a really solid plan. You definitely want to do your due diligence before jumping into out of state investing. I invest in Columbus, OH and the market here is crazy hot with such a growing population. Cleveland is also a pretty solid market. Picking a lender/agent/property manager can be like finding a needle in a haystack. A lot of agents have lenders, PMs, etc. that they've had success with and can refer you. That way you are getting insight from locals on the best professionals out there to fit your needs. Good luck!!

3 Reply

Zeke ListonBusiness Member

Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes

5y

Originally posted by @Lilah Johnson:

@Zeke Liston Hello. I'm looking at Cleveland and possibly Toledo at the moment.

That's great, best of luck!

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Steven Goldman

Lender · PA · Member since 2019 · 533 posts · 461 votes

5y

Ohio is a great place to invest as the properties are significantly less expensive than many other areas. However, where do you live? You will find that local banks are often reluctant to lend money to out of state investors. Many local banks limit their geography and customer base to their area.

It is also important to understand that lower priced properties are often hard to finance. Most funding companies and some banks have minimum loan sizes. You can get a pre-qualification or pre-approval from any legitimate investment loan originator once you have a deal. Many lenders base their pre qualification on debt service coverage. They can not issue a general pre-qualification without knowing the specifics on the property you are trying to acquire. (Rent, price, taxes and insurance) Good luck with all of your deals!

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Eric GoldmanBusiness Member

Lender · PA · Member since 2019 · 357 posts · 190 votes

5y

@Lilah Johnson sounds like a great plan! stay on the agents to make sure they are sending you properties! Are you from that area? I think I saw something about out of state?

484-574-4878

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OP

Rental Property Investor · Member since 2021 · 24 posts · 25 votes

5y

@Drew Cheezum thank you for the advice. I'll be sure to look for an investor friendly agent and ask for those connections!

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Remington LymanBusiness Member

Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes

5y

Originally posted by @Lilah Johnson:

Hello all. I'd appreciate some guidance or validation in my plan below. I am a first-time investor that has been researching my butt off for the past few months and am very appreciative of this forum. So much information and resources!

I'm pulling the trigger and getting started in real estate investing after reading all that I can get my hands on and educating myself.

I have saved about 40-50K to use as a downpayment on, hopefully, two three-unit or quadriplexes in the Ohio area. These would be buy and hold.

I'm currently in the process of taking out a Heloc on my primary residence of up to 100K that I just want to have at my disposal until I have saved enough cashflow from those properties to support any repairs, vacancies, etc.

I then plan to reach out to banks in the Ohio area to get preapproved for a mortgage so I can have that on hand.

Afterwards, I will reach out to agents and property managers in the area to find properties.

Am I on the right track? Any ideas or advice would be appreciated.

Sounds like you are on the right track! Ohio is a great place to start.

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OP

Rental Property Investor · Member since 2021 · 24 posts · 25 votes

5y

@Eric Goldman @Steve Goldman

I'm in California.

Good info about the out of state lenders and the loans. I didn't know this so I'll do more research on a few lenders.

[email protected]614-363-2787

Marc RiceBusiness Member

Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2018 · 2k+ posts · 1k+ votes

5y

I think that's a good plan to get your finances together first so that you then know how much you can afford in your search. Columbus, OH is a good market for appreciation and cash flow.

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Account Closed

Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes

5y

Originally posted by @Lilah Johnson:

@Eric Goldman @Steve Goldman

I'm in California.

Good info about the out of state lenders and the loans. I didn't know this so I'll do more research on a few lenders.

I live in Maryland and have no problem getting loans from local banks in Ohio I wouldn’t worry about it.

[email protected]614-963-3340

Brandon GoldsmithBusiness Member

Real Estate Agent · Columbus, OH · Member since 2020 · 1k+ posts · 1k+ votes

5y

Seems like a solid plan for OOS investing. There are a lot of good markets in Ohio @Lilah Johnson

Joshua Bailey

Member since 2021 · 55 posts · 15 votes

5y

@Justin Phillips i was looking to get a regular HELOC, but the bank came back and said its easier to pay my mortgage off with the heloc and still have access to the 20k for a down payment on my 1st rental. Is this the 1st position heloc your talking about? Its a variable rate at 2.75 is what she told me compared to the 4.6% on my current fixed rate mortgage

OP

Rental Property Investor · Member since 2021 · 24 posts · 25 votes

5y

@Marc Rice thank you. I'll look in Columbus as well.

OP

Rental Property Investor · Member since 2021 · 24 posts · 25 votes

5y

@Michael P. Thank you!! GLAD to hear/read this.

OP

Rental Property Investor · Member since 2021 · 24 posts · 25 votes

5y

@Brandon Goldsmith thank you!

Justin Phillips

Lender · Phoenix, AZ · Member since 2018 · 440 posts · 256 votes

5y

@Joshua Bailey That sounds like a 2nd position Heloc that would be put in 1st position. That might still work for your situation though.
Normal helocs aren't meant to be transactional so there are some differences there, and term etc. The biggest difference with this loan though is the zero balance sweep checking account. You don't need to play the transfer game, every normal checking deposit is swept directly towards your remaining balance automatically.
2.75% is a great rate for a Heloc, I wonder if that might be a "teaser rate". That's where there a special low rate to start, then it increases after a certain amount of time passes.

Sean C.

Gulf Coast, TX · Member since 2021 · 24 posts · 13 votes

5y

Originally posted by @Joshua Bailey:

@Justin Phillips i was looking to get a regular HELOC, but the bank came back and said its easier to pay my mortgage off with the heloc and still have access to the 20k for a down payment on my 1st rental. Is this the 1st position heloc your talking about? Its a variable rate at 2.75 is what she told me compared to the 4.6% on my current fixed rate mortgage

In a book I just read, if I read it correctly, they (Brandon) advise to look at the max % that variable can go up to, and, how much max % it can go up per year, so you dont end up upside down - if it goes up 2% a year to a max 11%, For example, you can calculate how that might change your payments.

Good luck!

Best,

SC

Rick Albert

Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes

5y

It makes sense. Keep in mind once you get the HELOC it counts towards your debt to income ratio, even if you aren't using it. The banks assume that you would use it at some point.

I did something similar in Los Angeles where I took out a HELOC on my first house hack condo and put that towards my house where I built out the ADU. It definitely was a life saver!

Good luck!

Emma Minor

Columbus, OH · Member since 2021 · 2 posts · 3 votes

5y

@Lilah Johnson Hi Lilah, sorry I can’t be much help in giving you advice about your plan as I am in the process of saving to start my investment career but I talked to a woman this week who is trying to get rid of 9 rental properties in different parts of the Cleveland area. I’m not sure exactly what you are looking for but if you’d like I can send the list over to you along with her number and the information I got from our conversation.

3 Reply

Mel Hayes

Investor · Los Angeles, CA · Member since 2016 · 256 posts · 110 votes

5y

@Lilah Johnson You are going to leave Califirnia to live in Ohio?

Jason Shine

Rental Property Investor · Cincinnati, OH · Member since 2021 · 6 posts · 4 votes

5y

Originally posted by @Grant W. Wilson:

Lilah, congrats on making the decision to go down this route - real estate investing is the best route to financial freedom. I want to echo Justin's advice about staying strict on deal criteria. Don't buy a deal just because you're ready to become an investor. Wait for a deal with numbers you get excited about! I like to build a financial model using conservative numbers, then I like to lower those numbers by 10-20% just for the fun of it. If the deal still looks good then I know I've got a good margin of safety. If you model deals like this, your surprises will be pleasant. Don't be the first-time investor (like I was) who quickly bought a decent deal, only to find a MUCH better deal 3 weeks later, but be forced to pass on it because my capital was tied-up.

I want to share my favorite tool for modeling real estate deals - I found it through the BiggerPockets podcast. It's called DealCheck. I highly recommend using this platform as it will save you SO much time compared to building a new spreadsheet for each deal. What I love about the platform is it's highly customizable, so you can run "quick & dirty" analysis or you can drill down and get as specific & detailed as you want with each line item in the estimate. Another thing I love is the platform's ability to model multiple investment strategies: BRRR Investments, Fix & Flips, Buy & Hold, etc. Finally, it's affordable - I pay about $200/year.

Here's my referral link: https://dealcheck.io?fp_ref=gw...

You can use the code "BESTDEAL" for 20% off.

Hope this helps!

Grant, I agree about waiting for a deal that makes sense - especially in this hot market. The challenge comes in the case of a 1031 exchange when you only have 45 days to identify a replacement property and 6 months to close. If multiple replacement properties are needed, it's a very tight timeline. This will be coming up for me and I'm trying to navigate everything. I hope that I don't have to take a deal that isn't ideal.

OP

Rental Property Investor · Member since 2021 · 24 posts · 25 votes

5y

@Rick Albert something I didn't consider. I think this could probably put a bump in my plan. I didn't know that they'd count it if it was unused at the time if applying for financing for a property. Thanks for letting me know.