HELOC vs Sell

Orlando, Florida
Creative Real Estate Financing
3yFollow

HELOC vs Sell

Candace Sanchez
Member since 2022 · 2 posts · 0 votes

Do we sell a property that cash flows about $500 a month or do we get a HELOC at 10% interest?
If we sell the property we would be able to use about $100,000 to put towards other investments.  I think we would be able to buy at least 2 more properties with $100,000. If we decide to go the HELOC route we would need all 3 of our properties to pay for the HELOC. The newest property would not be able to cashflow if we pulled the monthly payment from there. 

0Reply
21 views

Most Popular Reply

Brayden Hrycko
Lender · Allentown, PA · Member since 2023 · 207 posts · 38 votes
3y

Hello @Candace Sanchez,

How much equity do you have in the home? What do the numbers on the properties look like? Does it make sense to buy two or one good investment. That is for you to decide. I wouldn't look at it as how many properties, I would look at it as how the properties are performing. By doing the math on what the heloc would cost vs selling and using that towards the new property you should be able to pin-point which would seem like the better option for you. 

1Reply
See this reply in the discussion

8 Replies

Jump to latestLatest
  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    3y

    It depends….how quickly do you think you can pay back the HELOC? Will you cash flow more than $500 if you sell that property to invest in others? Are you doing a 1031 exchange and if so, will you be able to find the properties to purchase in time?

    [email protected]330-354-6590
    Brittany Minocchi - Barrett Financial Group, LLC522 Reviews
    View Page
    0Reply
  • Brayden Hrycko
    Lender · Allentown, PA · Member since 2023 · 207 posts · 38 votes
    3y

    Hello @Candace Sanchez,

    How much equity do you have in the home? What do the numbers on the properties look like? Does it make sense to buy two or one good investment. That is for you to decide. I wouldn't look at it as how many properties, I would look at it as how the properties are performing. By doing the math on what the heloc would cost vs selling and using that towards the new property you should be able to pin-point which would seem like the better option for you. 

    1Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Candace Sanchez

    If you get a HELOC (good luck) you most likely will only get up to 70% arv and whatever you buy you are most likely over leveraged.

    Between the two properties what would be your cltv and total cash flow?

    If both were to require $10k in repairs or be vacant could you afford it?

    What’s your exit strategy if you know what hits the fan ?

    7e investments53 Reviews
    WebsiteView Page
    0Reply
  • Candace Sanchez
    OP
    Member since 2022 · 2 posts · 0 votes
    3y
    Quote from @Brittany Minocchi:

    It depends….how quickly do you think you can pay back the HELOC? Will you cash flow more than $500 if you sell that property to invest in others? Are you doing a 1031 exchange and if so, will you be able to find the properties to purchase in time?

    The HELOC would take us quite some
    time to payback. We would have to use the money from the unit we are getting money from to pay it back. We already have 1 property identified. We would want to identify a second property. 
    0Reply
  • Jay Williams
    Investor · Laurel, MD · Member since 2014 · 23 posts · 7 votes
    3y

    Hello Candace,

    If you decide to sell the property, be sure to look into doing a 1031 exchange as a tax benefit. Be sure to have at least 2-3 properties in mind before starting the 1031 process as time is of the essence.

    Best of luck to you hun!

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    3y

    @Candace Sanchez. Sounds like that heloc will decimate your cashflow!  Having 2 properties isn't as cool as having 3.  But having 2 properties plus cash in your pocket each month is way more cool than 3 properties with no positive cash flow - and you on the hook for every unexpected expense.

    I'd recommend the slower growth option and echo what @Jay Williams.  Sell but do a 1031 exchange so you don't lose any of the profit to tax.

    The 1031 Investor5140 Reviews
    WebsiteView Page
    1Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    3y

    HELOC at 10% would require you to make atleast 10% on that investment for it to make sense.
    I think its risky to assume you can get into the investment and make atleast 10%.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.880 Reviews
    View Page
    1Reply
  • Jay Williams
    Investor · Laurel, MD · Member since 2014 · 23 posts · 7 votes
    3y

    @Basit Siddiqi That's a great point! I'll be sure to keep that in mind when I come to this crossroad 1 day.

    @Dave Foster you have laid out great points as well. 2 of the main things remember from B school at FSU is:

    1: never blow into a breathlayzer! Never give them evidence to use against you. lolol

    2. A lot of great businesses fail b/c they attempt to grow too fast.

    I like the term, slower growth, at the end of the day, it is still growth!

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free