Newish investor looking for experienced advice

[Amber Straub]

Hey there, 

I’m in a rut and looking for experienced advice for my next move. 

I purchased my first investment via house hacking Nov 2021 with a duplex in Naples, FL. 

Purchase price: 553k at 2.3% 

Mortgage balance: 523k.

Cash flow: $3250/mo after mortgage

Current value: 705k (via Zillow)

Then I purchased my second property which is a single fam with ADU in March 2023.

Purchase price: 535k at 6.7%

Mortgage balance: 506k

Cash flow: maybe a couple hundred after I move out. Right now the ADU is 2k/month and I live for free using profits from other duplex.

I put approximately 30k into rehabbing the main house on this one with a full kitchen and bathroom remodel. Significant improvements that I’m sure increase the value of the home. 

Problem: I am now strapped for cash and would also like to continue my real estate journey. Credit card is maxed from renovations with high interest rates. I work as an RN but am I single mother and the idea and pulling more hours makes me ill. I want to work smart, not hard. 

Should I pull a HELOC? Just work and Save? Refinance? What would you do with the funds if you did pull a HELOC? Fix and flip? BRRRR?

I have got the house hacking method down. But I have yet to use HELOC or refinance method as a stepping stone in my journey.

Any advice is appreciated! 

[Ke Nan Wang]

Hi Amber, seems like you have accomplished a few successful investment projects. Awesome job!

Just a quick note for your question, HELOC is taking a percentage of the property LTR around 70% for best rate and up to 80% probably for a higher rate, then subtract your outstanding balance on the mortgage. Often people think they are taking a percentage of the equity and it's not.

So even it may feel like you have gained lots of equity but there isn't much to take out from a HELOC in the scenario you described. Your property needs to be worth $1M for you to take 200k out at 70% LTR in a HELOC.

Keep in mind, there are deca millionaires go bankrupt overnight because no matter how much asset they have, they cannot cover their debt payments with their cash on hand. Even somehow they get through, it's lots of stress and I don't think you want to be end up in their shoes. You win big with appreciation but cashflow is absolutely the king. I would take a little breather, wait a couple of months to half a year, or even a year for you to build up more cash, stabilize and reassess your position. Don't get caught in this fever of you have to go big and go fast. Although there is nothing wrong with expand to 50 units in a few years but just understand there is a huge stress and risk associated with that and I feel like that's not something you've signed up for or intended to go into. RE is not a get rich quick scheme.