How to Acquire My Next Property?

Question

Hey guys! My wife and I are homeowner's here in Fort Worth Texas. We spent the first year of our marriage renovating the house I purchased myself prior to getting married. We sold that house, made about $65k and rolled every bit of that into our next house, where we currently reside. I have been wanting to get into real estate investing for a few years now and I am happy to say we are about to close on our first rental property. Fortunately for us, we were able to purchase my neighbors fully renovated bungalow off market for a great price. To do this, we borrowed the downpayment from my parents, roughly $75k, and took out a DSCR loan to finance the rest. We already have tenants ready to sign the lease agreement for 12 months at $2,675. This property will be cash-flowing about $400 to $475 per month. Obviously most of the proceeds will start going towards paying back my parents, but we want to keep the ball rolling and acquire more properties. How should we go about obtaining the downpayment funds for our next investment property? We have a fair amount of equity in our primary residence as well as the rent house, so maybe a cash out refinance or HELOC? Let me know!

Thanks,

Branden

Thanks,

Branden

Drago Stanimirovic · Answer

Branden, you’re on the right track. To fund your next deal, a HELOC on your primary or the rental gives you flexibility without touching your mortgage. A cash-out refi is also solid, but watch your DSCR and rate impact. You could also explore cross-collateralization using existing equity..

Terrance Teague · Answer

Hey Branden,

Congrats to you and your wife on closing your first rental! That’s a huge win, especially in today’s market.

As for your next property, you're already thinking in the right direction. Tapping into equity through a cash-out refinance or HELOC on either your primary or rental property is a common path investors take to fund future deals.

A primary residence HELOC often offers the best terms (lower interest rates, more flexible draw periods). Just be mindful that it’s tied to your home, so make sure the cash flow from any future investment can comfortably cover the added debt service.

A Rental Property Cash-Out Refi could also work, especially if the property appraises well with that tenant in place. DSCR loans sometimes allow for cash-out refis, depending on the lender and seasoning requirements.

The best option in my opinion would be partnering with someone or a group of investors to buy a property/properties.

Bottom line, you’ve already done the hardest part by getting started and now it’s about doing your homework, and continuing to learn and build relationships.

Branden Barber · Answer

Understood!

While we do not have the funds to aggressively save up a LARGE nest egg, we do have a personal emergency fund in place that would cover most if not all major expenses. My wife lost her job at the beginning of the year, and we have not touched it once, but we also can't add as much to it now either.

We plan to set aside all cash-flow from this property for the first year as the emergency fund for that property. From there, we will start making payments to my parents.

I am working on flipping houses in the meantime to expedite that payback too.

Branden Barber · Answer

Thanks for the response!

How would I go about getting a HELOC, and/or doing a cash-out-refi, to where my next property could still cash-flow? My understanding is that HELOC rates are pretty high, and I am not sure how I would be able to put 20% - 25% down on my next rental, while still being able to cash-flow. Maybe I am missing a key point here?

I will also look into the software you mentioned, thanks!

Thanks

Caleb Brown · Answer

Do you have reserves/money set aside? I would make sure you have a nest egg saved up before adding another property especially when you borrowed the DP for the first property. As far as the next one you can do HELOC but it'll be expensive and I would not do that as DP unless it's on a property you are going to rehab and quickly pay off the HELOC balance. If you have a decent amount of equity I would lean on selling and finding a house hack. Then use the excess proceeds to buy another non owner occupied property. Be careful on scaling too aggressively, I would be very captious of adding much more when you owe your parents 75K.

Branden Barber · Answer

Thanks for the info! I will be sure to dive into this route.

Drago Stanimirovic · Answer

Great job on the DSCR deal and strong cash flow. For your next down payment, a HELOC on your primary or rental is the smartest move, flexible, fast, and you avoid resetting a low-rate mortgage. Cash-out refi works too but usually costs more and takes longer.