Investor · Warner Robins, GA · Member since 2016 · 28 posts · 3 votes
Assume you have a 100k HELOC, I understand the leverage power of purchasing 5 100K properties using 20K down each instead of paying cash for 1 100K property, this concept seems to work best with buy and hold properties, in my opinion anyways. What about Flips? It makes sense to me to pay cash for a flip assuming you have the purchase price and rehab price available in a HELOC, considering the idea that your expecting a fairly short project life span. Would it ever make sense to seek traditional bank financing (assuming the property is financable), use a portion of your HELOC for a down payment and rehab expense. Just curious to hear others thoughts about using HELOC for flipping instead of buy and hold.
@Mike Vann Could you elaborate on "buying your properties right"? Do you mean distressed properties below market value? Are you essentially doing the BRRRR method? I'm trying to figure out how people are acquiring properties so quickly without using their own money. Could you do the same thing with a hard money loan?
@Stacey Paulin, Yes, what I meant by "buying right" was that I make sure I buy the properties at a low enough price to be able to fix them up and still be at or below 85% LTV, which is what I'm able to refinance with the bank. When I do the refi, I get all the money back, and sometimes more, to repay the line of credit. You could do the same thing with a HM loan but you would need to make sure you purchase the property for a low enough price to account for the higher loan costs. Sometimes I do the BRRRR method and sometimes I will do a Contract for Deed agreement depending on the location of the property. If I do a CFD, I will get a portion of my equity back from the down payment and then in 2 years when they convert to conventional bank financing I will get the rest and use it to pay down the debt on my multifamily units. Hope this explanation helps. Good luck with your investing!
@Mike Vann are you refinancing a property your flipping and then selling and paying off the financing. I see your strategy being well with buy and hold which I assume is what your, just curious. Also,if you are doing long term properties, can you provide some details about how you've found financing for 15 properties that close together. Thanks!
@Ramsey Howard, I am buying the properties well below market value and making sure that, including my repair costs, I am 85% or less LTV. I am buying these properties 2 at a time. I use the cash from my HELOC to buy and fix the property, then refinance at 85% LTV with the bank and get my money back to repay the HELOC. I am refinancing them individually but will close them 2 at a time just to be more efficient. Some of these I hold for rentals while others I sell on a Contract for Deed (owner finance) on a 2 year term so the buyer has time to repair their credit and then convert to conventional bank financing which gives me the rest of my equity that I use to pay down the debt on my multifamily units. Hope that helps!