Financing more single family rental homes.

7 Replies

Hi, very new to this site and have been listening to the podcasts (which I feel are a wealth of knowledge).  I will give a little bit of a snap shot of what I have going on.  I live in MN in a city of roughly 90K people.  I currently have my primary residence with approx. 100k in equity.  I also have three other single family rentals.  These are all close to two major colleges and the houses are rented to college students.  I have put 20% down on the three rentals and financed them with 30 year fixed mortgages (3.75-4.5APR).  I have 318K currently financed on the three properties and they are worth approx. 510k.  I profit a little over 3k a month after all the bills for the three houses are paid.  I also have a career that I make 75k-85k per year.  I would like to secure another 2-3 houses this next year.  My question is should I refinance my rentals for the down payment on more investment properties?  Pull out line of credits on them?  Or go a different route?  Thanks in advance for any advice and I apologize if this isn't posted in the right spot.

Thanks, Ben

I would first identify the viability of finding additional rentals in this market that fit your criteria for investment.  It is competitive out there and harder to find cash flowing properties than it was a few years ago.

If you can, I would look to refi instead of taking a line because I believe there are some implications in the new tax code of HELOCs not being deductible.  I am not a CPA, but that was how I was advised.

If you can't find more homes to buy, sell the whole portfolio, refi your house and buy some commercial properties. ;)

Thanks for the insight! I watch the listings religiously. There are still deals to be had in my market with my current trend of rentals, however I do agree that they are hard to find compared to a few years ago. I appreciate the comment! 

@Benjamin Fye I’d look into pulling a line of credit on one or a few of them and BRRR the next few. You have some conventional loans left and if you can get into them and rehab them you may be able to get the cash back out to do it again!

@Daniel Kurkowski there are interest tracing rules in place that would allow the deduction if he used a HELOC. In the past a HELOC could be deducted regardless of how it was used. If a HELOC is used for investment property it is still deductible as an expense against that property's income.

@Benjamin Fye I would talk to @Tim Swierczek about your options. I like the LOC approach as the closing costs are less however this isn't good for permanent financing. You will have to plan to pay it off or refi out of it.

@Benjamin Fye   This is a complicated topic and no one advice fits all scenarios.  Having said that I can't help but state a general principle, which is to focus on the end result and not on the exact rate.  If you focus solely on the rate you may give up great future deals trying to hold on to your currently low rates.  I recently refinanced multiple properties and even though my average rate increased I was able to buy enough properties that I doubled my cash flow in less than 12 months. 

I don't want to be misunderstood that you should always refi, but if the equity is there and wasted and opportunities exist in your market then your rate is costing you money.

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