All Forum Posts by: Kerry Baird

I like the answer that @Joe Homs gave you.  

Given what you have shared, your FICO is likely strong.  I personally am always looking for another deal, and having cash on hand, combined with a good FICO enhances the possibilities.  

I live close to you and have visited Ocala on a property tour.  They are two different types of markets.  Have you attended any of the local meetups?  I recommend you do, and hear some of the local market trends.  Talk with some other investors about rentals or fix & flips in Melbourne.  There are some great aspects of investing in Melbourne, such as jobs and proximity to transport, the infrastructure and so forth.  But it is expensive here, so you need to hunt to find properties that will work. 

My very limited experience in Ocala was that houses are more spread out, and people who live there commute to jobs.  There wasn’t so much growth, jobs or infrastructure…and the houses were cheaper.  

Since no one has answered, I’ll take a swing at this one.

A) Home equity lines of credit do have adjustable rates, but may be fixed for a time period such as a year.  My banks did not do a full appraisal, just used a desktop valuation, similar to a Zestimate.  They didn’t know whether the inside was updated or not.  The line can be drawn on and repaid, and then drawn on and repaid over the draw period, which can be 10 years or more, depending on lender.  Repayment period follows the draw period.  They are cheap to get started, often very little money needed up front, but the rates can get very high when they adjust, similar to a credit card.

B) When I have refinanced, I have had to get a full appraisal and the new mortgage replaces the old one.  I might get cash out, or I might refinance to get a lower interest rate.  I might also refinance into a shorter length mortgage.  These are expensive to set up, with full appraisal costing several hundred dollars, and then the closing costs, origination fee and so forth.

C) I haven’t gotten one of these myself, and understand that home equity loans are fixed rate, and the funds are taken in a lump sum.  No idea what they cost, except second mortgages are more expensive than firsts.

Figure.com is a fintech HELOC provider, and my only interaction with them was online application. They wanted the entire line drawn at the beginning in a lump. But that was different from other lenders that I have sourced HELOCs from.

Not knowing your background, your portfolio and what your plan for the money is, it would be very difficult to tell you what option will give you more profit.  

Welcome to BP!

In your case, I would do the math specific to you. Are there penalties to withdraw, and what rate do you repay your IRA vs what interest rate will you pay for the HELOC (knowing they are variable, and rates may go down or up)? Your credit score will come into play, and the closing costs that you are able to get from a local community bank or credit union.

Because this won't be an investment to you, the interest on your HELOC will not be deductible but would be on an investment property (talk with your own CPA).

@Spencer Martindale, Welcome to BP and thank you for your contribution.  Hope to see you more often!

I haven’t heard of one and am surprised it is on offer.  Is this with a local credit union?

Lovely kitchen!  Well done on diving into a renovation, and then further down the road, getting the house rented.  You'll have some nice tax benefits, as well.  Looking forward to seeing the next one.  

In my local area, credit unions by far.  

Agree with post above.  In Florida each municipality has (or doesn’t have) rules on their books regarding allowing/denying STRs.  Search online and confirm with the Town Hall of the municipality in which the property is located. 

The only reason a HELOC makes sense for you is because you already do a version of the debt snowball. You paid off a super low interest rate mortgage, which I posit was the best thing since sliced bread and ought to have been kept in place.

Your natural tendency is to pay off those mortgages, so go with that strength.  Navy Federal CU has a very long draw and payoff period, and would allow a high amount to be drawn against your primary residence.  Draw from the line and buy an investment property in Florida.  Use all rents to debt snowball the funds…it only took us 3 years when we did this with our portfolio.  Then draw again for another Florida purchase, and snowball again.  The re-use of funds would be a huge benefit to you as you wouldn’t have high mortgage closing costs each time.  While your folks are settled, they can keep a lookout for potential rental properties.  Trips you take to visit them become a write off, as long as you have investment property purchased in the area.  

It would not take very many paid off houses for you to earn more in rental income than you do in your job.  My 1990s 3 bed/ 2 bath starter house in Rockledge Florida rents for $2200, as an example. How many of those do you need?