Should I use my equity and heloc?
Member since 2022 · 42 posts · 24 votes
Hey everyone,
I have a fairly ignorant question, and have read a bit on the matter. But everyone’s situation is different and it’s hard to gauge this wild market so I wanted to put my question out there.
I have a house in Nashville with about $200k in equity. I also have a $40,000 heloc on that same property. I just moved out of it and started renting the property at about $800 cash flow/month.
i just moved into a 1958 home 15 minutes outside of Nashville with my girlfriend, and am renovating it. My question is- should I use my equity/heloc to invest in other rental properties, finish the renovation on this new property, or just leave it?
I feel like I have all this money just sitting there doing nothing, but maybe that’s what it’s supposed to be doing at this time due to the market volatility. What are y’all’s thoughts?
One concept I learned a few years ago really blew my mind and instantly converted me into a buy & hold investor. It was the ROI on home appreciation.
If you own a $350,000 rental property and it appreciates a boring 3% per year, that's $10,5000/yr in appreciation. That's almost $1,000 per month!
Holding on to property, even without big cashflow, is always a win. I would recommend to always be buying as long as you have at least $10,000 in reserves for each property you own.
Good luck!
It would be the best financial decision to purchase another property instead of renovating first. Don't string yourself out too thin, however, if you have proper reserves it will be far more beneficial than renovating your Live-In property. Now if the 1958 home is in dire need of updates, go ahead, but it sounds like you can live with the outdated house and put that money to work in a different property.
With this being said, there are a lot of bad deals out there right now, so double check pro-formas, do proper due diligence, and the next investment will be a cake walk. Good luck!
Hello Cody, you are asking yourself excellent questions! First, it sounds like you are in a great situation so congrats on getting yourself to this point. Next if I were you I would take inventory of your return on equity and the amount of time you have and are willing to invest. Your return on equity in this deal is 800*12/200,000 which is 4.8%. This is pretty low, and since you sound like a knowledgeable investor I am certain that you could get a better return on this money elsewhere.
Now that you know it is better to tap into that equity the question is how should you use it. If you have the time to manage your current rehab and purchase and manage another property then you should definitely do that as it will probably give you the highest returns. If you think that would be too much to manage you could consider investing in a syndication or partnering with another investor where you are the cash partner and they are the sweat partner. I actually know a syndicator who is doing a capital raise who is based out of Nashville, if you are interested let me know and I can connect you. I am also looking for cash partners on deals and would be down to talk but I am not here to pitch that, I just want to help you get the best returns on your money!
My last comment would be that it sounds like you have some concerns about the market volatility. It is good to be conscious of the market and if I were you I would make sure that you have healthy cash reserves to cover all of the RE projects you have going on before you go invest in another property. If you do this then you will be protected regardless of what the market does. Feel free to reach out if you have any more questions and I will do my best to help!
One concept I learned a few years ago really blew my mind and instantly converted me into a buy & hold investor. It was the ROI on home appreciation.
If you own a $350,000 rental property and it appreciates a boring 3% per year, that's $10,5000/yr in appreciation. That's almost $1,000 per month!
Holding on to property, even without big cashflow, is always a win. I would recommend to always be buying as long as you have at least $10,000 in reserves for each property you own.
Good luck!
It would be the best financial decision to purchase another property instead of renovating first. Don't string yourself out too thin, however, if you have proper reserves it will be far more beneficial than renovating your Live-In property. Now if the 1958 home is in dire need of updates, go ahead, but it sounds like you can live with the outdated house and put that money to work in a different property.
With this being said, there are a lot of bad deals out there right now, so double check pro-formas, do proper due diligence, and the next investment will be a cake walk. Good luck!
Thank you Max! This is awesome and makes me feel a lot better about taking it slower on the live-in house!
One concept I learned a few years ago really blew my mind and instantly converted me into a buy & hold investor. It was the ROI on home appreciation.
If you own a $350,000 rental property and it appreciates a boring 3% per year, that's $10,5000/yr in appreciation. That's almost $1,000 per month!
Holding on to property, even without big cashflow, is always a win. I would recommend to always be buying as long as you have at least $10,000 in reserves for each property you own.
Good luck!
Brad I love this perspective! Thank you for the advice. I can afford to have lower cash flow right now, as long as it means I am building equity. So I think I know my answer, and will be beginning my search soon!
@Cody Thayer Investors are always buying/selling/wholesaling property. Investors are always reviewing there numbers. You said the property cash-flows $800. We assume that's after all the expenses. If not you better review your numbers. That's a home run rental property in my eyes. None of our rentals cash-flow that amount. The ROE probably fell off cliff but who cares?.. Nashville is a great market and I'd hold onto everything.
Play the long game.
Hello Cody, you are asking yourself excellent questions! First, it sounds like you are in a great situation so congrats on getting yourself to this point. Next if I were you I would take inventory of your return on equity and the amount of time you have and are willing to invest. Your return on equity in this deal is 800*12/200,000 which is 4.8%. This is pretty low, and since you sound like a knowledgeable investor I am certain that you could get a better return on this money elsewhere.
Now that you know it is better to tap into that equity the question is how should you use it. If you have the time to manage your current rehab and purchase and manage another property then you should definitely do that as it will probably give you the highest returns. If you think that would be too much to manage you could consider investing in a syndication or partnering with another investor where you are the cash partner and they are the sweat partner. I actually know a syndicator who is doing a capital raise who is based out of Nashville, if you are interested let me know and I can connect you. I am also looking for cash partners on deals and would be down to talk but I am not here to pitch that, I just want to help you get the best returns on your money!
My last comment would be that it sounds like you have some concerns about the market volatility. It is good to be conscious of the market and if I were you I would make sure that you have healthy cash reserves to cover all of the RE projects you have going on before you go invest in another property. If you do this then you will be protected regardless of what the market does. Feel free to reach out if you have any more questions and I will do my best to help!
Jacob I would be interested in connecting for sure on some of those options. I am new to this site, so am not sure exactly how to exchange info, so let me know what you need from me to discuss
@Cody Thayer Investors are always buying/selling/wholesaling property. Investors are always reviewing there numbers. You said the property cash-flows $800. We assume that's after all the expenses because if not you better check the numbers. ROE probably fell off cliff but who cares? Nashville is a great market I'd hold onto everything you own.
Hey everyone,
I have a fairly ignorant question, and have read a bit on the matter. But everyone’s situation is different and it’s hard to gauge this wild market so I wanted to put my question out there.
I have a house in Nashville with about $200k in equity. I also have a $40,000 heloc on that same property. I just moved out of it and started renting the property at about $800 cash flow/month.
i just moved into a 1958 home 15 minutes outside of Nashville with my girlfriend, and am renovating it. My question is- should I use my equity/heloc to invest in other rental properties, finish the renovation on this new property, or just leave it?
I feel like I have all this money just sitting there doing nothing, but maybe that’s what it’s supposed to be doing at this time due to the market volatility. What are y’all’s thoughts?
I would only invest the $40K heloc in the property you're living in if the plan is to rent and/or sell it, hence you're getting a return on investment from the $40K. If you just plan on living in the home then I'd purchase another investment property and use the $40K to support that purchase as a downpayment.
@Cody Thayer Investors are always buying/selling/wholesaling property. Investors are always reviewing there numbers. You said the property cash-flows $800. We assume that's after all the expenses because if not you better check the numbers. ROE probably fell off cliff but who cares? Nashville is a great market I'd hold onto everything you own.
I'd have an agent run comps. Your equity could be 150K or 250K. Zestimate is not a great resource. As far as what to do. I would take it slow(if it was me). Use the money to finish the project you are on then find another deal.
@Cody Thayer Investors are always buying/selling/wholesaling property. Investors are always reviewing there numbers. You said the property cash-flows $800. We assume that's after all the expenses because if not you better check the numbers. ROE probably fell off cliff but who cares? Nashville is a great market I'd hold onto everything you own.
I'd have an agent run comps. Your equity could be 150K or 250K. Zestimate is not a great resource. As far as what to do. I would take it slow(if it was me). Use the money to finish the project you are on then find another deal.
Good call on getting a real estate to provide me an estimate before committing to an appraisal and all that stuff. I’ve got one in Nashville that I’ll reach out to for that! And yes I think after taking everything into consideration, that’s a good point on the renovation. I’m not moving out of here tomorrow, so no point in trying to get this house ready to sell, just to sit another 3-5 years. Thank you Caleb!!
I think David Greene’s episode 684 “The Energy of Money” would be a good listen for you related to your question on if you should tap into your equity or not.
It was eye opening for me to hear David talk about how equity in a property is similar to cash in a bank account and how it just needs to be converted to access it. His perspective was that money in a bank account is easier to access and deploy where equity in your property is difficult to access when you’re ready to make your next investment.
@Cody Thayer yes yes yes
@Cody Thayer
Yes, definitely tap into that equity! That’s how I got 12 or 13 of my rentals. I used equity just sitting there not doing anything for me to scale up including using if for rehabs. It feels like buying houses for free. I also did three 401k loans to use to buy houses that generate great cash flow. It’s all about your return on your equity. Crunch the numbers. If you can make a buck off that equity, then put it to use. Good luck.
Hey everyone,
I have a fairly ignorant question, and have read a bit on the matter. But everyone’s situation is different and it’s hard to gauge this wild market so I wanted to put my question out there.
I have a house in Nashville with about $200k in equity. I also have a $40,000 heloc on that same property. I just moved out of it and started renting the property at about $800 cash flow/month.
i just moved into a 1958 home 15 minutes outside of Nashville with my girlfriend, and am renovating it. My question is- should I use my equity/heloc to invest in other rental properties, finish the renovation on this new property, or just leave it?
I feel like I have all this money just sitting there doing nothing, but maybe that’s what it’s supposed to be doing at this time due to the market volatility. What are y’all’s thoughts?
I would only invest the $40K heloc in the property you're living in if the plan is to rent and/or sell it, hence you're getting a return on investment from the $40K. If you just plan on living in the home then I'd purchase another investment property and use the $40K to support that purchase as a downpayment.
Ok perfect yes that makes sense!! I guess as long as my ROI is higher than my heloc interest rate, then I guess I can consider that a good investment? My dad brought me up to pay debts first before spending money. So im trying as hard as I can to get into the mindset of - I can invest in another asset that can pay my bills for me. Even if I owe $40k on a heloc, as long as my cash flow is paying that off each month and then some- then I'm good! Am I thinking correctly when I say that?
I think David Greene’s episode 684 “The Energy of Money” would be a good listen for you related to your question on if you should tap into your equity or not.
It was eye opening for me to hear David talk about how equity in a property is similar to cash in a bank account and how it just needs to be converted to access it. His perspective was that money in a bank account is easier to access and deploy where equity in your property is difficult to access when you’re ready to make your next investment.
This is huge Cameron, I’ll listen to that today on my drive. Thank you for the share!!
@Cody Thayer yes yes yes
@Cody Thayer
Yes, definitely tap into that equity! That’s how I got 12 or 13 of my rentals. I used equity just sitting there not doing anything for me to scale up including using if for rehabs. It feels like buying houses for free. I also did three 401k loans to use to buy houses that generate great cash flow. It’s all about your return on your equity. Crunch the numbers. If you can make a buck off that equity, then put it to use. Good luck.
John, it’s good to hear from someone who has done this same thing and experienced it with success. This makes it very real to me, and makes me think that it obviously can be done if other people are doing the same thing!! Thank you John for the confidence here and reassurance!
Get a first position heloc on the property where you have the equity. Use that to buy more properties.
Renovate the home you're living in right now slowly. One room at a time.
1. are you really cash flowing $800 a month after all expenses? post them here if you want =)
2. don't buy something just to buy something.
@Cody Thayer
Yes, definitely tap into that equity! That’s how I got 12 or 13 of my rentals. I used equity just sitting there not doing anything for me to scale up including using if for rehabs. It feels like buying houses for free. I also did three 401k loans to use to buy houses that generate great cash flow. It’s all about your return on your equity. Crunch the numbers. If you can make a buck off that equity, then put it to use. Good luck.
John, it’s good to hear from someone who has done this same thing and experienced it with success. This makes it very real to me, and makes me think that it obviously can be done if other people are doing the same thing!! Thank you John for the confidence here and reassurance!
Whether you take a HELOC or not, you should always have an emergency fund in the bank equal to 6 to 12 months of your salary.
I've seen things go south quickly when people get laid off or get sick, a tenant causes thousands in damages or you have unforeseen capital expenses.
One concept I learned a few years ago really blew my mind and instantly converted me into a buy & hold investor. It was the ROI on home appreciation.
If you own a $350,000 rental property and it appreciates a boring 3% per year, that's $10,5000/yr in appreciation. That's almost $1,000 per month!
Holding on to property, even without big cashflow, is always a win. I would recommend to always be buying as long as you have at least $10,000 in reserves for each property you own.
Good luck!
Brad I love this perspective! Thank you for the advice. I can afford to have lower cash flow right now, as long as it means I am building equity. So I think I know my answer, and will be beginning my search soon!
Sweet man! I think the books and gurus often focus far too much on cashflow and it impedes a lot of newer investors from buying anything at all. I firmly believe that owning real estate is just simply better than not.
1. are you really cash flowing $800 a month after all expenses? post them here if you want =)
2. don't buy something just to buy something.
Get a first position heloc on the property where you have the equity. Use that to buy more properties.
Renovate the home you're living in right now slowly. One room at a time.