I&#x27;m about to get a $100,000 HELOC. Now what?

OP

Member since 2020 · 15 posts · 7 votes

4y

Thanks for the info, Jason.

Would a brokerage account with six- plus months of reserves in stocks work for the PITI?

Scott E.

Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes

4y

Sounds like the best use for that $50k is to finish your basement and finish that 200 sq ft cabin.

OP

Member since 2020 · 15 posts · 7 votes

4y

Quote from @Scott E.:

Sounds like the best use for that $50k is to finish your basement and finish that 200 sq ft cabin.

Definitely an option.

We could feasibly rent out the finished basement for around $1000 per month, if not a bit more. Though it may be hard to find a tenant because we're a little further out in the country.

The finished cabin we'd probably keep as an AirBnB, as we've been able to rent it out steadily even without plumbing and electricity.

I'd hope to have a little HELOC left over after finishing both spaces for a down payment on a rental. I also have about $15K set aside to fund a down payment.

Steven Foster Wilson

Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes

4y

Quote from @Mike Schoeffel:

Hey all. I'm a long time BP podcast listener, but this is my first time posting in the forum.

Anyway, I'm set to close on a $100K HELOC within the next couple weeks. I'm interested in hearing some seasoned veterans' opinions on how best to spend this money in real estate investing to maximize my returns.

A few pertinent notes:

1) At least $25K will go toward a new roof and a well, both of which we desperately need.

2) I'd like to leave $20-25K untouched so I can pull from it in emergencies.

3) The other $50-55K is basically free game.

4) I have an unfinished basement which I could finish and rent out. There's already one bedroom with a bathroom down there that we rent on AirBnB.

5) We also have a 200-square foot lofted cabin on our property (we have 16 acres) that we could install plumbing and electric in.

6) I'm interested in purchasing one or two long term rentals (preferably duplexes) that would cash flow 300-400 per month. I've run the numbers on several places that would meet that criteria. I'm open to ideas about this, though. My only stipulation (other than $300-400 monthly cash flow) is that the property is within an eight-hour drive of my home, which is just west of Asheville.

So what do you think. Any ideas?
Happy to be entering into the BP online community.

If you buy another property then you have the potential to get cashflow and if you buy into equity eventually refinance. Through this, you would be able to then buy another property and keep the ball rolling or then use that money to refinish the cabin/basement but still have cash flow.

OP

Member since 2020 · 15 posts · 7 votes

4y

Quote from @Steven Foster Wilson:

Quote from @Mike Schoeffel:

Hey all. I'm a long time BP podcast listener, but this is my first time posting in the forum.

Anyway, I'm set to close on a $100K HELOC within the next couple weeks. I'm interested in hearing some seasoned veterans' opinions on how best to spend this money in real estate investing to maximize my returns.

A few pertinent notes:

1) At least $25K will go toward a new roof and a well, both of which we desperately need.

2) I'd like to leave $20-25K untouched so I can pull from it in emergencies.

3) The other $50-55K is basically free game.

4) I have an unfinished basement which I could finish and rent out. There's already one bedroom with a bathroom down there that we rent on AirBnB.

5) We also have a 200-square foot lofted cabin on our property (we have 16 acres) that we could install plumbing and electric in.

6) I'm interested in purchasing one or two long term rentals (preferably duplexes) that would cash flow 300-400 per month. I've run the numbers on several places that would meet that criteria. I'm open to ideas about this, though. My only stipulation (other than $300-400 monthly cash flow) is that the property is within an eight-hour drive of my home, which is just west of Asheville.

So what do you think. Any ideas?
Happy to be entering into the BP online community.

If you buy another property then you have the potential to get cashflow and if you buy into equity eventually refinance. Through this, you would be able to then buy another property and keep the ball rolling or then use that money to refinish the cabin/basement but still have cash flow.

Good advice.

The properties I'm looking at are cheap enough that I'd be able to pay them off within 10-15 years if I put an extra $250 per month toward the principal (in theory).

So you think it'd be wise to cash out refinance after I've built up some equity in the rental, then use that money to snowball into another property?

Steven Foster Wilson

Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes

4y

Quote from @Mike Schoeffel:

Quote from @Steven Foster Wilson:

Quote from @Mike Schoeffel:

Hey all. I'm a long time BP podcast listener, but this is my first time posting in the forum.

Anyway, I'm set to close on a $100K HELOC within the next couple weeks. I'm interested in hearing some seasoned veterans' opinions on how best to spend this money in real estate investing to maximize my returns.

A few pertinent notes:

1) At least $25K will go toward a new roof and a well, both of which we desperately need.

2) I'd like to leave $20-25K untouched so I can pull from it in emergencies.

3) The other $50-55K is basically free game.

4) I have an unfinished basement which I could finish and rent out. There's already one bedroom with a bathroom down there that we rent on AirBnB.

5) We also have a 200-square foot lofted cabin on our property (we have 16 acres) that we could install plumbing and electric in.

6) I'm interested in purchasing one or two long term rentals (preferably duplexes) that would cash flow 300-400 per month. I've run the numbers on several places that would meet that criteria. I'm open to ideas about this, though. My only stipulation (other than $300-400 monthly cash flow) is that the property is within an eight-hour drive of my home, which is just west of Asheville.

So what do you think. Any ideas?
Happy to be entering into the BP online community.

If you buy another property then you have the potential to get cashflow and if you buy into equity eventually refinance. Through this, you would be able to then buy another property and keep the ball rolling or then use that money to refinish the cabin/basement but still have cash flow.

Good advice.

The properties I'm looking at are cheap enough that I'd be able to pay them off within 10-15 years if I put an extra $250 per month toward the principal (in theory).

So you think it'd be wise to cash out refinance after I've built up some equity in the rental, then use that money to snowball into another property?

I am currently on my 9th BRRRR. I fix them up some a full gut and some just a cosmetic lift. Then I cash-out refinance and put the money into another property. I am not worried about trying to pay off my property because the tenant will do that with the rent money. I think you have to decide what your goals are and how can you get there. I always like to write things out. Every Sunday my wife and I will sit down and write out our goals and how we are going to do that this week. We have our big goal but to achieve that there is a lot of small ones along the way.

3 Reply

Shiela R.

Investor · Boulder, CO · Member since 2017 · 304 posts · 347 votes

4y

@Mike Schoeffel I agree with @Steven Foster Wilson on the truth that you have your big goal but it takes constant checkins to see what actions you need to take today, tomorrow, next month, etc to achieve the big goal. That being said, do you like doing the STRs on your property? If so, I'd put the equity into increasing the cashflow from the STRs. If you don't love it or just want some diversification, there are some compelling reasons to look into the Columbus, OH market depending on what your skillset is. I love your thinking so far!

OP

Member since 2020 · 15 posts · 7 votes

4y

Quote from @Shiela R.:

@Mike Schoeffel I agree with @Steven Foster Wilson on the truth that you have your big goal but it takes constant checkins to see what actions you need to take today, tomorrow, next month, etc to achieve the big goal. That being said, do you like doing the STRs on your property? If so, I'd put the equity into increasing the cashflow from the STRs. If you don't love it or just want some diversification, there are some compelling reasons to look into the Columbus, OH market depending on what your skillset is. I love your thinking so far!

I enjoy STRs, but I want to branch out into LTRs because we live in a very seasonal area. I'd like to have steady cashflow to offset the highs and lows of STRs.

My sweet spot for LTRs, I think, is going to be small turnkey or near-turnkey MFs. I may look into doing BRRRs down the road, but that seems a little too time-consuming and risky for someone like me (i.e. someone with not a lot of extra time, no handyman skills and minimal real estate experience) at the moment.

OP

Member since 2020 · 15 posts · 7 votes

4y

Quote from @Steven Foster Wilson:

Quote from @Mike Schoeffel:

Quote from @Steven Foster Wilson:

Quote from @Mike Schoeffel:

Hey all. I'm a long time BP podcast listener, but this is my first time posting in the forum.

Anyway, I'm set to close on a $100K HELOC within the next couple weeks. I'm interested in hearing some seasoned veterans' opinions on how best to spend this money in real estate investing to maximize my returns.

A few pertinent notes:

1) At least $25K will go toward a new roof and a well, both of which we desperately need.

2) I'd like to leave $20-25K untouched so I can pull from it in emergencies.

3) The other $50-55K is basically free game.

4) I have an unfinished basement which I could finish and rent out. There's already one bedroom with a bathroom down there that we rent on AirBnB.

5) We also have a 200-square foot lofted cabin on our property (we have 16 acres) that we could install plumbing and electric in.

6) I'm interested in purchasing one or two long term rentals (preferably duplexes) that would cash flow 300-400 per month. I've run the numbers on several places that would meet that criteria. I'm open to ideas about this, though. My only stipulation (other than $300-400 monthly cash flow) is that the property is within an eight-hour drive of my home, which is just west of Asheville.

So what do you think. Any ideas?
Happy to be entering into the BP online community.

If you buy another property then you have the potential to get cashflow and if you buy into equity eventually refinance. Through this, you would be able to then buy another property and keep the ball rolling or then use that money to refinish the cabin/basement but still have cash flow.

Good advice.

The properties I'm looking at are cheap enough that I'd be able to pay them off within 10-15 years if I put an extra $250 per month toward the principal (in theory).

So you think it'd be wise to cash out refinance after I've built up some equity in the rental, then use that money to snowball into another property?

I am currently on my 9th BRRRR. I fix them up some a full gut and some just a cosmetic lift. Then I cash-out refinance and put the money into another property. I am not worried about trying to pay off my property because the tenant will do that with the rent money. I think you have to decide what your goals are and how can you get there. I always like to write things out. Every Sunday my wife and I will sit down and write out our goals and how we are going to do that this week. We have our big goal but to achieve that there is a lot of small ones along the way.

I think my sweet spot is going to be s turnkey or near-turnkey MFs. I don't currently have the time, skills or motivation to focus on BRRRs, though I'm not ruling it out in the future.

Our long-term goal is to make enough money for my wife to quit her job in 10 years. I've run the numbers on several properties currently on the market, just to get a feel for things, and it seems achievable. Like you said, focus will be the most important factor.

Benjamin AakerPro Member

Rental Property Investor · Brandon, SD · Member since 2015 · 1k+ posts · 1k+ votes

4y

Quote from @Mike Schoeffel:

Hey all. I'm a long time BP podcast listener, but this is my first time posting in the forum.

Anyway, I'm set to close on a $100K HELOC within the next couple weeks. I'm interested in hearing some seasoned veterans' opinions on how best to spend this money in real estate investing to maximize my returns.

A few pertinent notes:

1) At least $25K will go toward a new roof and a well, both of which we desperately need.

2) I'd like to leave $20-25K untouched so I can pull from it in emergencies.

3) The other $50-55K is basically free game.

4) I have an unfinished basement which I could finish and rent out. There's already one bedroom with a bathroom down there that we rent on AirBnB.

5) We also have a 200-square foot lofted cabin on our property (we have 16 acres) that we could install plumbing and electric in.

6) I'm interested in purchasing one or two long term rentals (preferably duplexes) that would cash flow 300-400 per month. I've run the numbers on several places that would meet that criteria. I'm open to ideas about this, though. My only stipulation (other than $300-400 monthly cash flow) is that the property is within an eight-hour drive of my home, which is just west of Asheville.

So what do you think. Any ideas?
Happy to be entering into the BP online community.

Hi Mike, I think you answered your question with #6. I am a huge fan of using lines of credit to purchase the next property. You have a HELOC on what I presume is your primary residence. My rule of thumb is that each property's LOC needs to be paid for by the cash flow of that property. For your primary residence, it's your primary income. For the next property, it's the cash flow. As long as you keep that you have less risk of getting under water with each new property.

Shiela R.

Investor · Boulder, CO · Member since 2017 · 304 posts · 347 votes

4y

Okay, @Mike Schoeffel that is fair. Good to be honest about our strengths and weaknesses;) I would not recommend BRRRR unless you have construction experience AND are buying in a stable market AND that you get a discount. Given this, I don't know how turn key MFs would be. From what I've seen 4-plexes provide more cashflow, typically. But then again, I have a friend killing it with duplexes (both LTR and STR) in Columbus, OH. He's an agent and I taught him everything I know if you are interested in his info, just DM me.