Buy and Hold Strategy or Fix and Flip advice

[Jason Young]

I'm having second thoughts on my B&H strategy and thinking of doing Fix and Flip instead. What do you think?

My B&H strategy is as follows:

I have a HELOC currently pending approval, when I get the funds I will research my next investment and purchase it with the HELOC funds if I find the right deal.

I will get the unit ready and rent it out. I will then get a cash out refi on that unit if/when permissible to pay back my HELOC and then research and hopefully purchase another rental with the funds that I just paid back into my HELOC account from the cash out refi. Repeat process...

Essentially, I should be able to use the HELOC funds as my starter and then do a cash out refi on each unit and just keep working out of the HELOC as revolving credit as needed.

The way I see it, if I did a few of these a year I would basically be making only a few HELOC payments a year when I'm using those funds, when I pay back the HELOC with cash out refi funds then I'll be making payments on the cash out refi. The problem is, obviously, on each rental I get I will have to do a cash out refi to pay back the HELOC. So the coffers would be full from the cash outs but I'd have to make payments on each one. The units will be worth more because A. I bought them at a good price and B. I renovated them but I'm not sure if the math is going to add up.

Perhaps I need to get more into the analysis calculators but it would appear that with the payments on the cash outs compared to what I would be bringing in from a tenant would the cash flow would be slim to none. Now after writing this all out my strategy doesn't sound so great now haha. If anyone cares to chime in on this I beg you please!! I might have to change my strategy back to F&F and pickup B&H's on occasion when the deal is just right or I have accumulated enough cash as to where I can get a B&H and pay in full. In the meantime I'll be crunching numbers, looking at the analysis tools and possibly rethinking my strategy.

The other thing is, again I do already have my first condo and I own it in full, maybe there's a way to include this in my strategy as far as cash out refi on it or selling it. If sold it I would get back roughly $150k of which I put $120k into it. I however, would like to keep this unit in my portfolio as it is if I can.

If anyone responds, I thank you in advance,

Jason

[Brenda B.]

@Jason Young I am in this exact situation- we just closed on a house that we bought using a HELOC from our primary home. We're moving forward even though we don't know if we're going to do the BRRRR method or flip it. However it's getting to the point where we need to make up our minds because we will rehab it one way for a rental and a different way if we plan on flipping. I also need to research what the tax implications are in each scenario. My husband and I each work full time W-2 jobs, and the plan is that two of our adult sons will do a majority of the rehab work- but they can't start until June so we're just spinning our wheels. I'm very interested in the responses you'll receive and I wish you lots of luck!!