All Forum Posts by: Alyson Gordon

Good afternoon and happy President's Day!  I am a new investor and I've gotten myself stuck in the mud, so I am looking for advice from some of you wonderful folks.  

Context of my story/situation (please forgive the length).
I purchased my first beach house (which I intended to use as my primary residence) with an FHS loan in August 2022 in Pensacola, FL. I purchased for $420k and the house needed quite a bit of updating/fixing and furniture, so I spent another $64,000 in repairs using my savings along with credit cards...yeah...ouch...I know... Unfortunately, in April of 2023 my aging parents' health went in a rough direction (father Alzheimer's/dementia, mom immobility) so I had to "move" back to Dallas, to care for them and also help them with their own bills. However, I thought what a great opportunity to utilize my beach house as a Short Term Rental, and I listed it on Vrbo and tapped into the greatness of BiggerPockets. Last year's summer bookings were specatcular (offseason/winter/fall) have been cold as ice with almost no bookings. So, I am now living in Dallas again in one of my parent's bedrooms (ugh...), helping them with their bills, while also paying for a beach house STR that is not covering it's own expenses (thank God summer is on the way), and I am carrying $64k in credit card debt with interest that is eating my lunch. Prior to purchasing the beach house my credit rating was 720 and of course after buying the house and running up credit card debt my credit is now below 600, which is preventing me from refinancing the house. On a positive note, the Pensacola beach house ended up being a great investment and according to Zillow/etc. it's now worth over $500k in value. Note also, the beach house is my "primary residence" as I never intended to use it as a STR until I had to move back to Dallas to help my parents.

So...with all of that being said, my gut tells me that perhaps I can tap into the equity of the beach house (after a new appraisal) and utilize that to both pay off credit cards and put a down on my second investment property (probably Dallas).  However, I am struggling to figure out how to raise my credit rating to find a lender that would allow me to refinance the beach house so that I can pull out money to pay off credit card debt.  It feels like one requires the other...refi requires good credit...good credit requires the refi...

Does someone have some insights as to how to do a home equity line of credit based on an appraisal and with a low credit score?  I realize I may be asking for a miracle here, but I hoped perhaps some of you great professionals could provide some wisdom.  Thank you for reading my story and wishing you all continued success!

Kind regards,

Matt

I would starting by have a clear goal for your investment - is it cash flow, COC, ROE? It is just going to something to set it and forget it?

If you decide to go the STR route check for city, county and HOA regulations. STRs are also going to require a lot more cash up front due to furnishing it. STRs are a lot more involved and hands on but should generate a lot more income. If you decide to go LTR then I would focus on getting on a strong passive cashflow and making sure you have access to a good property manager unless you plan to self-manage. LTRs tend to be more hands off even if you do self-manage.

Either way, you'll need to practice analyzing deals so that you don't buy a property that doesn't produce for you :)