All Forum Posts by: Tucker Cummings

Saw this video today on one of the podcasts. Sound like he's doing a similar strategy with HELOCs.

@Wale Lawal - I guess that's the basis of my question. Why refinance if I'm going to have the same buying power with using a HELOC? Seems like in order to pull off the BRRRR strategy, the real key is not necessarily recouping your cash, it's recouping your buying power. If you're using private or hard money, you have to pay back someone, so refi is your only option. But if you're in a situation like me and don't owe anyone, I don't think doing a refinance is necessarily the best option anymore. 

Better yet, if I can find rates & terms like what @Steven Griffith mentioned at 90% LTV, I'll have even more buying power than with a 75% Cash Out Refi. So essentially the house I just purchased (110k Market Value), I put 86k in to get it. With a 90% LTV, I could get 99k to do a BRRRR with. With a cash out refi, I'd only get about 81k. Also I have the ability to do delayed financing, so I could recycle funds as soon as the rehab is done and pay off the HELOC. Not saying I would want to stretch myself to every last dollar, but just demonstrating the options.

@Brent Coombs

I have 3 properties. My primary, plus 2 investments.

My primary needed a lot of work, we flipped it, the refinanced it to pull our money back out. BRRL (Buy, Rehab, Refinance, Live) I guess. There's not enough equity in the house to pull out a HELOC, since we pulled out the cash we put into it at 80% LTV. Beside that point, I don't consider a primary residence an investment, rather it's a liability in my eyes.

December last year - We bought an investment off MLS. It was around market value, 20% down conventional loan. Not the best deal, but it's running a 35% CoCR so I'll consider the cash flow a win. I just wanted to get in the game instead of sitting on the sidelines.

This year - made a commitment to do a BRRRR deal. With Coronavirus, coupled with my inexperience, I couldn't get any private or hard money loans so I had to save up my own cash. I've done that, and now have that property and am doing the rehab. Once appraised I'll have equity in the deal to either hold in cash or pull out the HELOC.

@Brent Coombs

I do have a primary residence. I did a live in flip this year

@Brent Coombs

You can get a HELOC against an investment property, however it's usually 70% of your equity, where against your primary residence it's 80% against your equity.

So if you have 100k in equity on a primary residence, you'll have an 80k HELOC. If on an investment, you'll have 70k.

@Jimmy Lieu

It comes from the money invested in the deal. So I’ll say that I’ll be all in on this property for $86,567.

If I hold, I'll cash flow about $900-$950. ($925x12)/86,567 = 12.8% ROI. I'm also going to capture about 30k in Equity, so that's gotta count for something.

If I do a cash out refi, I'll probably only leave about 5k in the Deal, but cash flow would drop to about $400/month. (400x12)/5,000 = 96% ROI. I'd also have about 81k back in my pocket.

Thing is, the HELOC will still give me that 80k-ish buying power.

@Brian Ellis

Who else felt that chill when Brian said “I’m 32 but I feel like I’m 55.” Geez brother, that struck a cord with me. I’m 27 and feel like I’m just wasting away, a slave to my laptop, making sure my Microsoft Teams icon stays green...

I fantasize daily about leaving me job. I’m closing on my second investment on Friday. Can’t wait for the day to walk in and say peace out! You’re an inspiration!

Just chiming in to say that 1031 exchange only applies to "like" assets. Real Estate for Real Estate, a farm animal producing X amount to a farm animal producing 2x amount, etc.

You may already know this, but worth noting on the topic.

@Steven Griffith Perfect. My main goal is just to have buying power, while still having the security of strong cash flow. It sounds like the HELOC will still allow me to buy properties.

Meanwhile, I just ran the numbers on my portfolio of these two properties (obviously projected, since I've just acquired this one):

Annual Cash Flow: $16,281.61

Portfolio CoCR: 15.14%

Portfolio Cap Rate: 11.04%

Obviously there's way more to consider than just these numbers, but given these stats, I think I'm in a comfortable enough position that I don't need to pursue the refinance right away. Besides, I can always refinance later on if I want. 

@Paul Shannon, right, so my thinking was that I could use short term debt from a HELOC as a method to capture a BRRRR property, then use the long term debt from the refinance on that second property HELOC with it.

When I look at my portfolio (a massive portfolio of 1 house) its 60% expenses, 40% cash flow. If I held this property outright, it would swing to 60% cash flow, 40% expenses, so I think that gives me more security, especially considering the volatility of this market. 

One thing that I really want to be prepared for is if there is a significant downturn with lots of foreclosures or other distressed situations. I want to be able to capture property quickly. 

Can someone confirm that a HELOC would allow me to do that?