Buy new home/rent out existing vs. BRRRR out of state

2 Replies

Hi all, first time poster, been following for a few months.

Live in Bay Area, CA. Thinking of leveraging heloc to put down payment on another property around where I live, likely in the $1-$1.2M range. Would move family to new house and rent out existing. Likely wouldn’t cash flow existing. Property could break even before capex/vacancy, which really means I’m signing up for a monthly loss estimating $350-500 month while I cross my fingers the 9.5% CAGR continues on what’s today a $1.05M valuation.

Would you:

A) do this

B) if not, how best to leverage heloc for real estate investing

C) tell me what I’m not thinking about

Thanks all for your thoughts.

-Doug-

That idea sounds a little risky. It would appear that the market is beginning to soften so putting yourself into a situation where you are already losing $350-$500 per month leaves you zero cushion on the downside. The key to successful real estate investing is not to leverage to the extreme. All markets are cyclical so you need to be prepared for the time that market prices decline. In your situation, you might want to diversify your risk by using a HELOC to buy property in another state; a state where Californians seem to be flocking to. Never put all your eggs in one basket.