Second property: Should I get another mortgage, heloc, or OPM?

Question

Hello All! I am preparing myself to buy my second property (currently house hacking), but my local market is extremely expensive. Therefore, I’m looking at out of state/upstate properties. I’ve been spending time learning and studying how to analyze properties and feeling pretty good about it. My question is, should I consider getting another mortgage, a heloc on my primary, or pool in money from others? My goal is cash flow, as I am looking at the long term. I really would like to connect with someone and talk this through. Thank you for taking time to read.

Bryan Blankenship · Answer

Hey there @Lakisha Fulmore,

New York's real estate market will always have that "too expensive" threshold that new investors struggle with.

If you are looking to go out of state, I can connect you to my partner.  He and I have a big operation here in the greater Cincinnati area, a much more affordable market.

Lakisha Fulmore · Answer

Also, I am not sure the amount of cash flow I am looking for. Of course I would like a ton, but I’d be ok with 400-500 per month.

I like the mortgage idea as opposed to using other peoples money, since I am still so new to this.

Lakisha Fulmore · Answer

Thank you Mohammed for your reply and suggestion. I think I will go that route. Thank you again!

Mohammed Rahman · Answer

Hey @Lakisha Fulmore congrats on your first property as well as reaching the point and deciding to invest in another!

From what you mentioned about cashflow being the most important investment goal for you, I recommend looking into getting another mortgage. Generally, pooling in money with other people for residential properties might not be the best idea unless you're all absolutely aligned on the investment goals (e.g., when to sell, what to set as targets, how to split costs, etc.) which usually work out better for larger properties.

Not saying you can't use OPM, but you have to decide if it's worth it in that scenario to bring in other voices/opinions on your deal if you can own the whole pie by getting a mortgage.

Feel free to give me a shout and we can chat offline on a call or something - I'm also an investor (and a realtor) based in LI.

Bryan Blankenship · Answer

@Lakisha Fulmore

Go ahead and send me a DM with your info and I will be sure to share with him! 🙂

Michael K Gallagher · Answer

I think it greatly depends on how much cashflow you are looking to achieve and what the HELOC amount is for.  You mentioned wanting to go after cashflow, but how much cashflow, over how many years, how active do you want to be in the investment?  If you have people already interested in investing with you or partnering with them then I think that could be a great opportunity, but if you have access to simple debt, or can make the purchase in cash with the HELOC, and the returns meet your criteria, then I'd always prefer to go that route vs the other peoples money route.

John Mausteller · Answer

I personally would go with a mortgage , with a locked in interest rate for the next 15 to 30 years.  If it is allowing some cash flow for you, while also guaranteeing that there will be no rate increases, it keeps you in a safer area.    If the rates do drop, you can refinance and increase your cash flow.  Most HELOCs are variable rates traditionally so your cash flow would always be changing - I know some lenders are starting to offer a fixed rate option though.

Second property: Should I get another mortgage, heloc, or OPM?

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