Investor · Gresham, OR · Member since 2019 · 38 posts · 15 votes
Hey bigger pockets community, I'm pretty new to this so the simplest thing is probably for me to tell you my plan and have you guys, the firing squad, shoot some holes in it ;).
We have about 500K of equity in my primary residence. We are cash flow positive from our W2 jobs by $3-5K/mo. Our risk tolerance is pretty low in terms of introducing additional monthly payments. We are thinking about converting our current 15yr mortgage into an All In One loan and tapping into that equity to purchase a short term rental. Then, using our W2 income as well as the STR income to pay down the line and repeat when there is enough available credit.
I am also wondering if we should look into starting an LLC. Is that an option in my scenario? What are the pros and cons?
Anything else I'm missing? I appreciate the expertise!
Rental Property Investor · Seattle, WA · Member since 2014 · 69 posts · 51 votes
4y
If I were you, I'd look to simply refinance the equity you need out of your home, and then focus on the BRRR strategy. So you'd take the proceeds from your refinance, buy another home and fix it up, and then refinance that one - over and over again.
As for an LLC, do a search here - you'll find many many opinions on LLC or not. I'd recommend instead of getting a LLC, just make sure you have umbrella insurance coverage. For one thing, you won't be able to get a conventional loan on a house in the name of your LLC. If you're planning on buying a property with 5+ units, that is different, but it doesn't sound like it.
Pigeon Forge, TN · Member since 2020 · 102 posts · 69 votes
4y
I am not sure I understand why you need to cash out the equity in your home. I would keep that liability as low as possible or even pay it off. If you have great jobs, 3-5k left over at the end of every month, and good savings then look at the possibility of getting a 2nd home loan, or some other conventional option.
Partner with a real estate agent that focuses on STRs and will help you make sure you are buying a property that will cash flow and you will be fine!