first deal

3 Replies

Happy to announce we just completed our first deal. Had been a student of Real estate investing for quite some time and finally pulled the trigger. We managed to use a heloc with 1.9% to purchase a 2/2 condo for 25k. We spent about $500 to make rent ready and the target rent is $850/ month. HOA is $242/ month so the cash flow will be decent. The question is to aggressively pay off the HELOC or use the heavy cash flow to build up reserves in case there are hidden costs that might come up? Also using a property manager since the property is 2 hrs away.

@Bill P.

Congrats, Bill P.! Sounds like a cash flow positive investment. In terms of reserves vs. HELOC, I recommend both. Save some money to make repairs needed, although Condo's have HOA's that cover some of the major expenses associated with Rentals, and pay back HELOC as soon as you can so you can do it again. Cheers!

Stuart

If you have long-term access to the HELOC, you might as well pay it down because it's instant available cash if you find something else to invest in, and you would not want to put liquidity in anything earning a higher return than the rate of your HELOC, which is probably in the 3-4% range. Exception to this might be if the tax benefits of the HELOC plus the return rate on banked liquidity exceed the HELOC interest rate, or if your access to the HELOC is about to expire (my bank does 10 years, not sure about others).

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