Thoughts on a getting HELOC to buy 4 SFH

5 Replies

I am thinking of taking out a 200k HELOC on my personal property to buy 4 or 5 SF homes to add to my portfolio . The 200k will cover the 20% down on probably 4 homes, each one will cash flow $200- 500 per month, and I would be financing the 80% balance. I am not sure I will be able to get 4 new mortgages within a year though. Do you think this is a good plan or should i use the 200k to purchase 1 sfh outright.

Hey Bob!

I'm curious about this as well. I'd like to do a similar strategy like you (buy 4/5 SF homes) but I'm wondering if that's the best strategy. 

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@Bob Romano is that projected $200-$500 cash flow factoring in the payment on the HELOC? Interest only at prime +1% on your $50k down payment is $270, and that doesn't even account for the $50k principal. TK is hard to make work if using a HELOC for the down payment and conventional financing for the rest.

@Bob Romano

Leveraging is a great way to go, because in the end you will have 4 cash flowing properties versus 1 when they are all paid off. Plus, I imagine even with mortgages you will probably cash flow more with 4 properties versus 1. You could also buy 1 at a time cash, make some improvements, increase the value of the property and hopefully pull most or all of your initial investment back out with delayed financing. Then do it over again. With a new purchase, you can count 75% of rental income on the new purchase and of lease agreements on new purchases that are not yet reflected on your tax returns. Some lenders may have overlays that don’t allow this, but Fannie Mae does allow this, so it is possible. 

@Nathan Maier it does not factor in the HELOC payment. I was going to refinace a few of my other properties and pull some equity out to pay down the heloc. I am getting a great rate at 2.99% on the heloc for the first 12 months, so that will give me great leverage.