All Forum Posts by: Chris Baxley

My wife and I have been slowly growing our SFH buy-and-hold portfolio and are now at a point where a) we want to grow faster and b) have gotten to a level of sophistication where we feel we've outgrown our existing accountant, who is not an expert in REI and doesn't proactively bring tax saving strategies to us. I'm looking for an accountant in the Nashville area who is an expert in REI tax strategies, will proactively bring us tax saving opportunities and ideally, is an RE investor themselves.

@Diego Zambrano Thank You! We went to the local office of a regional bank that I have used a number of times in the past and where I have a relationship with the loan officer. I doubt there are uniform rules around issuing HELOCs on investment properties, but would imagine your best bet is with a local banker who knows the market and, ideally, is someone that you've developed a relationship with. I had lived in the 1st property, but it was five years before we took out this HELOC

Another factor worth mentioning is that they knew that we had successfully managed and cash flowed the first home and that helped them understand that we weren't taking undue risk that we couldn't manage.

The 2nd home is in The Nations, a neighborhood that young professionals find highly desireable.

Thank You, Richard!

I just ran some rough numbers from when we executed this strategy and we still had about 29% of 'untouched' equity in the 1st investment property that we took the HELOC out on.

I still consider myself as someone who is early in their REI career and am still actively learning as much as I can from both others and from refining my own analysis on properties. With that said, I don't have a good rule of thumb on leverage ratios for HELOCs that I would swear by. I will say that for someone who is looking to grow their portfolio over the coming 10+ years, I tend to take the view that the equity in my rentals is relatively dormant capital and if I can deploy it and a) not inhibit appreciation and b) generate even nominal incremental additional cash flow then using the HELOC to secure additional properties makes a lot of sense.

I would add that I like to ensure that I am in a position to drop rents substantially without going negative on cash flows.  This is important to my wife and I in the event that the rental market in Nashville goes through a correction we can drop rents without having to make up negative cash flow gaps with household income.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $503,000
Cash invested: $125,000

Three years ago we purchased the twin, neighboring property (they had been built at the same time, by the same builder with the same floor plan) as our second SFH Buy-and-Hold and I ran into the then owner of this home and told her that if she ever decided to move to let me know. Three years later I got a text from her that she was moving. I went over to view it a few days later and made her an offer that afternoon.

What made you interested in investing in this type of deal?

My wife and I had grown comfortable with REI with our first two properties and I knew this house had been built better than any of the others in the neighborhood (we had looked at 20+ in the neighborhood before buying the neighboring house 3 years earlier).

How did you find this deal and how did you negotiate it?

Happened to meet the owner when we purchased the neighboring one in 2017 and told her to give me a call if she ever decided to move. She had planned to use a broker and sell it for $525.000. I told her that I was a buyer in the $500-505K range and that I could both save her the hassle of numerous showings AND put more money in her pocket net-net. She thought about it and we agreed to $503K.

How did you finance this deal?

Conventional Loan

How did you add value to the deal?

Home is still very new (4 years old) and in great shape, so no need for CAPEX investments. As I had done before, I included a clause in the purchase agreement that I be allowed to market and show the home before taking possession. I had it rented before closing on it and it would be vacant for a full 24 hours.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

No

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $425,250
Cash invested: $107,000

After 4+ years of success with our first single family buy and hold, which I had purchased with $0 down on a VA loan before my wife and I met, we decided to pursue our 2nd. We used a HELOC on the 1st rental for the down on the second.

What made you interested in investing in this type of deal?

We had success with REI with our 1st property and, when I knew my wife had grown comfortable with it, I pushed to expand the portfolio to a second single-family buy-and-hold.

How did you find this deal and how did you negotiate it?

Retail market with a retail broker

How did you finance this deal?

Conventional loan with the down coming from a HELOC on the first investment property that we had.

How did you add value to the deal?

Home was only one year old when we purchased it, so no need for structural investments. I did include a clause in the purchase agreement that I be allowed to market and show the house to potential renters before taking formal possession. I had it rented before taking possession. On day-of-close, we took possession in the morning and I handed over the keys to the renters that afternoon.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $425,250
Cash invested: $107,000

Used HELOC from our first rental property, which I had purchased years earlier with no money down, to purchase our second single family buy-and-hold

What made you interested in investing in this type of deal?

This was our second buy and hold single family home, our first is a home that I owned prior to our meeting and getting married. We rented that first home for 4+ years before I turned to my wife and said "You know, this REI thing is working for us with the one home, let's add a second". Fortunately she had grown comfortable with it by that time and we started the search that led to this one.

How did you find this deal and how did you negotiate it?

Retail Broker

How did you finance this deal?

Used a HELOC from our first rental for the down and conventional financing for the rest.

How did you add value to the deal?

The house was in great shape at time of purchase. It was build the year before and was essentially new. I marketed and had it rented before we took possession. I took the keys from the prior owners one day and handed them to our tenets that same day.

Lessons learned? Challenges?

The only 'lesson' that I would say came out of this is that we should have started expanding our portfolio sooner. One reason that we didn't is that I wanted to have my wife fully on board (she's more apprehensive about big decisions than I) and after four years with our first home, she was. Now I'm starting to be a little more aggressive with her on future portfolio expansion, but I've built the trust up such that she knows I'm on top of the numbers and not exposing us to undue risk.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $425,250
Cash invested: $107,000

We used equity from our first Rental Property, which I had purchased and lived in with a no-money down VA Loan before my wife and I met and were married, to use as the down on this, our second property. It is in a trendy neighborhood in Nashville that was at the time about 50% of the way through turning over from an old working class neighborhood to lot of 'tall skinnies' that attract young professionals.

The only contingency in the contract that I included, other than inspection, was that the prior owners allow me to market and show the home to potential renters. I had it rented, before I took possession and it hasn't had a single day of vacancy since it was purchased in 2017.

What made you interested in investing in this type of deal?

This was our second buy and hold single family home, our first is a home that I owned prior to our meeting and getting married. We rented that first home for 4+ years before I turned to my wife and said "You know, this REI thing is working for us with the one home, let's add a second". Fortunately she had grown comfortable with it by that time and we started the search that led to this one.

How did you find this deal and how did you negotiate it?

Retail Broker

How did you finance this deal?

Used a HELOC from our first rental for the down and conventional financing for the rest.

How did you add value to the deal?

The house was in great shape at time of purchase. It was build the year before and was essentially new. I marketed and had it rented before we took possession. I took the keys from the prior owners one day and handed them to our tenets that same day.

Lessons learned? Challenges?

The only 'lesson' that I would say came out of this is that we should have started expanding our portfolio sooner. One reason that we didn't is that I wanted to have my wife fully on board (she's more apprehensive about big decisions than I) and after four years with our first home, she was. Now I'm starting to be a little more aggressive with her on future portfolio expansion, but I've built the trust up such that she knows I'm on top of the numbers and not exposing us to undue risk.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $292,000

Single family home in highly desirable neighborhood that's "close to everything".

What made you interested in investing in this type of deal?

I didn't originally but this home as an investment. I owned it prior to my wife and I meeting and when we got married, we decided to keep it and try our hands at being landlords. It is our first rental.

How did you find this deal and how did you negotiate it?

Found through a retail broker that happened to be a friend.

How did you finance this deal?

I purchased the home on a VA loan with no money down (I lived in it for the first few years I owned it). This makes running any cash-based financial metrics a lost cause...my returns are infinite-ish.

How did you add value to the deal?

Did some do-it yourself upgrades while I lived there and have stayed on top of maintenance and any needed upgrades since. Am currently preparing architectural plans that, when completed, will allow us to raise the rent ~$700-900.

What was the outcome?

Has been a strong property for us with good returns. Value of property has almost doubled in the ten years since I purchased it. Used a HELOC on this property to buy our second single family buy and hold. More importantly, it has helped me get my wife comfortable with REI.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Used a friend as my buyer's agent.