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.
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!
Congrats on completing your first deal!
Have you found a PM you're going to use? If you'd want to do a guaranteed wholesale rental , I'd be happy to talk you through that.
Best of luck, and congrats again! :)
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).
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.