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!
@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.
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?
@Cody Thayer
My first question to you is what are your goals?
If you have some set well define goals, it helps you understand what you should do?
I have a couple HELOCS and I only use those lines of credit for flipping and renovating. I use that money when I have a fairly quick way and multiple exit strategy to get the money back.
I have used my home equity lines of credit to flip cars, houses, and to even give hard money loans.