Just signed rental contracts for my first 2 SFRs

Just signed rental contracts for my first 2 SFRs

Tim NicholasPro Member
Rental Property Investor · Lake Charles, LA · Member since 2017 · 48 posts · 38 votes

Hey BP family. I am very excited and loving what I am doing and a big thank you to Josh, Brandon, Mindy and the  rest of the Team at BP for the encouragement and the challenging blog's, forums and podcast, what inspiration. I just signed contracts and received my deposits and first month's rent on my recently required buy and hold rental properties. Thanks to brandon and his year end 60 day challenge! 

I purchased 2 homes using a HELOC against the equity in my home and a rental that I have had for 5 years. Here is how it shakes out.

Propery 1: 

Purchased in October from someone wholesaling the property (he was actually looking to me for private money lol). I had met  this guy through a PM in my area, this PM would help me with rental forecast for properties I was looking into.  Anyway I told the fellow I did do private lending but if he wanted to wholesale I would be intersested in purchasing it. Long story short I purchased from him for 33k, rehab was cost about 42k, my note is 350, insurance is about 70 per month, rent is 1k per month, 25 % for M&R and cap ex. I self manage through my construction business. Postive cash flow of 300 per month. 

Before

after:

not the best picture with the winter's dead grass and construction debris. I will update picture soon

Before

after

before

After

Property 2:

Purchased through a realtor. Listed for 50k, offer of 40k accepted. Rehab 4k, rent 800, note 225, insurance 60, M&R and cap ex 200. Cash flow about 300

Thanks again BP for the inspiration!!

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Nikiski, AK · Member since 2018 · 12 posts · 22 votes
8y

Great job.  Don't forget to set up a sinking fund for short lived items and an emergency fund for those inevitable bumps in the road and those moments that feel like the end-of-the-world.  Then, set up a plan to get the loan paid off ASAP -- 5 to 7 years comes to mind.  It's a slower route to becoming a real estate guru, but it will ensure your long term success.  The key to this type of investing is a slow, thoughtful, well planned path.

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  • Flipper/Rehabber · Newport News, VA · Member since 2016 · 128 posts · 54 votes
    8y

    great job! Very inspirational.

  • Real Estate Agent · Orlando, FL · Member since 2016 · 36 posts · 23 votes
    8y

    @Tim Nicholas Thank You for your explanation and encouragement...I will take your advice and pull the trigger with my first property (goal by end of March). Funding is my issue, but where there's a will there's always a way! Thanks again and best of luck building your portfolio.

  • Investor · Salt Lake City, UT · Member since 2016 · 287 posts · 270 votes
    8y
    Keith Stone I know there are multiple credit unions in UT that offer HELOCs on investment properties. 80% LTV on non owner occupied investment property from America First Credit Union. It’s advertised on their site....at least when I was looking into it and my good friend did this on two of his rentals.
  • Investor · Toronto, Ontario · Member since 2014 · 148 posts · 34 votes
    8y

    what market did you buy these in?

  • Tim NicholasPro Member
    OP
    Rental Property Investor · Lake Charles, LA · Member since 2017 · 48 posts · 38 votes
    8y

    This is in the Lake Charles La. Market. It is getting tight over here, lots of new builds due to economic expansion in the gas and oil industry. The big boys are flooding the market with the new subdivisions everywhere.

  • Investor · San Diego, CA · Member since 2017 · 7 posts · 2 votes
    8y

    Wow! Congrats! 

  • Investor · Lafayette/Baton Rouge, LA · Member since 2013 · 1k+ posts · 915 votes
    8y

    Nice work @Tim Nicholas! I'll just add, HELOC is a term that gets used loosely when people are actually talking about a commercial LOC.

    Technically a HELOC is only on a primary residence or second home as mentioned already. It wouldn't surprise me if you even come across a bank loan officer who uses the term interchangeably.

  • Wichita, KS · Member since 2017 · 58 posts · 13 votes
    8y

    So how does this work with your HELOC? Did you use the HELOC to purchase the homes outright and later you'll put them on a traditional mortgage, or did you just use the HELOC for the down payment/rehab and you'll pay it off over time with the positive cash flow?

  • Investor · Tustin, CA · Member since 2013 · 6 posts · 1 vote
    8y

    Congrats Tim on your purchases.

    To provide a more balanced view, I ran through the numbers and noted the following are not included:

    - implied property management (pay someone or pay yourself)

    - estimated vacancy

    - property tax

    If you factor in these real expenses, your long term cash flow will be significantly lower.

  • Investor · Washington, DC · Member since 2017 · 198 posts · 323 votes
    8y

    It is my understanding that Wells Fargo and TD bank offer HELOCs on investment properties: 

    https://www.tdbank.com/personal/home_equity_line_d...

    Wells Fargo doesn't have a link to share showing that they do HELOCs on investment properties but when you go here: 

    https://www.wellsfargo.com/mortgage/rates/compare-...

    and go through the process of getting your loan options there is a dropdown under "Refine Your Search" on the form that let's you select Investment Property.  

    I am going to try to take out a HELOC against a rental property I own free and clear in order to do this B(A)RRRR strategy once I get my credit score back up in the 780 range.

  • Investor · Centralia, IL · Member since 2016 · 43 posts · 10 votes
    8y

    Great job, best of luck and thanks for sharing, it’s inspiring. 

  • Residential Real Estate Agent · Broomfield, CO · Member since 2013 · 390 posts · 125 votes
    8y
    Originally posted by @Keith Stone:

    I have been a lender for years and have been in banking for 25, and I have never heard of a bank that does HELOCs on anything but primary or secondary home.

    In my experience, investment properties are specifically prohibited from this type of loan by loan policy.

    You may need to consider conventional commercial financing through the Commercial Loan Officer at your bank. The smaller the bank the better. Most LTV maximums are in the 75% range.

    Just some thoughts for you to consider.

    I actually just did a similar thing on a rental I have. I used a HELOC from my house to buy it, then since it's free and clear, I took out a HELOC on the rental to fund future investments. No problems from the bank, it's a local community bank - they've been great.

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