Newbie from Pittsburgh, PA

13 Replies

Hi All!  

My names Adam and I'm a new member here from Pittsburgh, PA.  

I've always been interested in REI and have since become more serious since I found the BP Podcast and Forums. There is so much useful and awesome information available! Looking forward to searching out local deals and getting my feet wet finally. If I've learned anything at all so far, it's to take ACTION and stop waiting for the perfect time to dive in.

A little bit about me...  I'm 35, engaged, and have a 9 month old baby girl at home.  I live in a townhome in the North Hills which is %100 paid off.  I'm looking to leverage the equity in my home (@$165k) to fund my first deal.  My credit is good and I have no debt, so I don't anticipate having any issues getting traditional financing.  I also have @$65k within my 401k.  I'm interested in both Single Family and Multi-Family homes as long as the numbers make sense, obviously.

Can anyone provide suggestions for financing my first deal? Should I go HELOC or Home Equity? Should I limit my search to homes less than $165k?

Any feedback would be greatly appreciated, thanks!  Super excited/eager to learn and to get my first deal under my belt!

Hey @Adam Keffer you've got a lot to work with. You could obviously use the HELOC, or borrow the down from your 401k, you could save cash for a down payment and get standalone financing for the new buy, or any number of things.

There's plenty of SFR near you that would cost less then 165k, and I'd be tempted to use just as much equity as I needed to put a down on the first one and get it rolling before repeating the process.

I wondered if you'd ever heard of the Infinite Banking Concept? Sometimes it's called "Be Your Own Bank". Might be a good fit for you since you mentioned you have a baby and your age.  

Originally posted by @Adam Keffer :

Hi All!  

My names Adam and I'm a new member here from Pittsburgh, PA.  

I've always been interested in REI and have since become more serious since I found the BP Podcast and Forums. There is so much useful and awesome information available! Looking forward to searching out local deals and getting my feet wet finally. If I've learned anything at all so far, it's to take ACTION and stop waiting for the perfect time to dive in.

A little bit about me...  I'm 35, engaged, and have a 9 month old baby girl at home.  I live in a townhome in the North Hills which is %100 paid off.  I'm looking to leverage the equity in my home (@$165k) to fund my first deal.  My credit is good and I have no debt, so I don't anticipate having any issues getting traditional financing.  I also have @$65k within my 401k.  I'm interested in both Single Family and Multi-Family homes as long as the numbers make sense, obviously.

Can anyone provide suggestions for financing my first deal? Should I go HELOC or Home Equity? Should I limit my search to homes less than $165k?

Any feedback would be greatly appreciated, thanks!  Super excited/eager to learn and to get my first deal under my belt!

 Hello and welcome! Best of luck to you!

@Adam Keffer welcome to BP. If I was in your situation I would do the HELOC over the Equity Loan. Obvious risks there are usually a variable rate on the HELOC which can cause some potential issues as rates potentially rise. That being said there are banks out there that do offer fixed HELOCs that just come with a slightly higher rate. That will at least make it so you know your rate and don't have to pay interest until you're ready. The reusability of the credit line just makes it that much more of a player in long term plans.

As for pricing I would say you should do that based on your risk tolerances. Are you the type who likes everything paid off, but doesn't have as many properties or are you comfortable with leverage of other people's money?

Thanks for all the feedback and well wishes, it’s much appreciated!

@Sean Ridlon , that’s something I have not heard about but would be interested in researching. Could you elaborate a little? 

Part of my issue is determining how I should start financing my first deal due to the plethora of options available. I do want to move into a new home and have another baby within the next 2 years, so I need to factor that into the equation as well. 

@Dan Mackin , I think I would prefer starting off small and not carrying any debt for my first deal. That being said, I know if I want to scale I will eventually have to leverage outside funds to do so. 

I use HELOCs, I like the flexibility/reuseablility of them. You can pull the cash from your HELOC, buy a property "free and clear" then once you get it rented, refinance it into a traditional, fixed rate mortgage. That solves the variable interest rate problem and allows you to pay off the HELOC and use it for the next one.

In addition, most HELOCs have very low fees. I took one on my primary residence, paid no origination fees, and make no payments on it unless I use it, and only pay $70/yr maintenance fee, so if I never touch it over the life of the HELOC (10 years) I'm only out a total $700 in 10 years, which I think is reasonable for the access to the cash. The biggest problem, in my opinion, with Home Equity Loans is that you usually have to make payments on them whether you use them or not. So if you take one out to buy a rental, then the deal falls through you still have to make regular monthly payments out of pocket or pay the loan off in full. And no, you cannot just use the loan proceeds to pay it off right away if you don't use it because of all of the fees associated with loan origination. For example, if you take a $60k home equity loan, you will get $60k in cash BUT you will owe about $65-66k on the loan balance because they tack all of the fees on to the loan and then you end up paying those out of pocket.

Hope that helps a bit and good luck!

@Adam Keffer There are many factors involved in your inquiry and some questions I would have in order to provide you the best advice. So I'm sending you a private message. 

@Adam Keffer welcome to BP and I vote for HELOC for the same reasons @Megan Clancy mentioned. 

More control on how much you actually pay per month and you aren't paying if you aren't using it. All generalities of course because it depends on your situation. 

What kind of deal are you trying to purchase? Rental, Flip, Still Deciding?

@Adam Keffer

Hi, Adam. I too live in a paid-off townhouse in the North Hills, near Ross Park Mall. We might be neighbors. As for home equity loan or HELOC, that'll depend on a number of factors. I've sent you a message to connect.

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