All Forum Posts by: Kevin Hilton

Quote from @Scott Trench:

Does the math change on using a HELOC if you use the HELOC for a short term period, until completing a cash out refinance on one of the LTR's that I own? I do not plan on paying interest on the HELOC for more than 2-3 months, so I guess the better question is will my portfolio benefit from acquiring a 4th property by leveraging a cash flowing LTR and therefore increasing the interest rate and lowering the cash flow on that property? That is the question I am having a difficult time answering. My goal has been to own 5 rental properties within ten years and we are at 3 in six years. Thanks for taking the time out to respond!!!

Hi Crystal, thanks for your response. The unit we have, one block further back from the beach we have been getting a little over 35k gross per year. This new unit should be able to do about 40k in gross. The cash out refinance would decrease cash flow by about 300 per month. 

@Richard Schubert no we don't own in VA Beach, we wanted a longer season so we are a bit further south in North Myrtle Beach. The season is pretty much from March - November, but you can get snow birds from Dec-Feb.

Quote from @Richard Schubert:

Quote from @Kevin Hilton:

Thanks for the response Richard. That is a concern I share, giving up the low interest rate and some cash flow on the LTR's. That is a reason I would consider selling one, because the STR is in a market that is likely to have more appreciation. It is hard to give up the strong cash flow though. Appreciate your thoughts!

Myself, I would stay with the numbers in front of me that have proven to be profitable. The STR, if purely an appreciation play, is speculation to me.

The STR is in the same neighborhood but is in a slightly better location, beach block vs 2nd block. I would anticipate about 40k gross per year based on what we get from the other STR, so I don’t think it will be strictly an appreciation play. It should cash flow as well, not quite as well as the LTR’s though.

I am not familiar with that option, but I will do a little research. Thanks!

Thanks for the response Richard. That is a concern I share, giving up the low interest rate and some cash flow on the LTR's. That is a reason I would consider selling one, because the STR is in a market that is likely to have more appreciation. It is hard to give up the strong cash flow though. Appreciate your thoughts!

I am looking to acquire my 4th rental property, but I would like some advice from all of the seasoned investors in this forum. 

Property to purchase would be a STR at $240,000 - so we would need the 20% down payment and we are looking at different options as the source of the funds. I would use money from a HELOC that I have open to fund the down payment, but as @Scott Trench stated recently on the podcast, that is a short term solution, and I don't want to hold that $48k debt for more than a few months.  Our current portfolio looks like this:

LTR that is worth 150k with 65k of debt left on it at 3.65% on a 20 year loan - PITI = $785 per month - long term tenants paying $1650 per month

LTR that is valued at 110k with 45k of debt left on a 4%, 20 year loan - PITI = $583 per month - long term tenants paying $1550 per month

STR that is valued at $275k with 155k of debt left on a 3.5%, 30 year loan - PITI = 1080 per month - brings in over 35k per year gross for the last three years.

Would you do a cash out refinance on one of the properties to pull out some of the equity to pay off the $48k HELOC or would you sell one of the LTR properties to pay off the HELOC?

Or would you not try to do this deal at all and wait to build up the cash position to fund the down payment, which could take 2-3 years?

Thanks for any and all advice!!

I know this may be contrary to many on BiggerPockets, but with those numbers I would go ahead and pay cash for those 11 doors. Within 2 years you should be able to add to your portfolio with that NOI. I would think within 7-10 years you would be in a great position to control your time. Those are some pretty expensive student properties. Is that in an urban area? The market I invest in is usually anywhere between 50k-75k purchase price with rents ranging from 1500-2200.

Thanks Taylor, I will keep my eye out.  I have done some looking into the Richmond area and I can see how it could be easy to overpay.  Knowing the nuances of a market is obviously very important to avoid overpaying on an investment.

Justin Webber, congratulations on your success!  The idea of purchasing student housing in cash sounds great, but what kind of numbers are we talking about?  How many doors in that 3 unit?  Is that one apartment with 3 bedrooms or 3 different units with 2-3 bedrooms?  For me, if the units would cash flow enough for me to purchase another student rental within 2 years then I would pay cash.  If I would not be able to save a 25% down payment in that 2 year period then I would probably leverage the 15 year fixed and look to buy an additional rental or two with that cash.  Another piece of the equation would probably be how old are you and what are your goals in the student rental niche?