All Forum Posts by: Tucker Cummings

I'm down. See ya'll there!

I've just purchased my first property in cash, with the goal of doing a BRRRR strategy. However, I haven't borrowed any money for the property, so I'm not obligated to pay anyone back (other than myself), and I'm wondering if a better strategy might be to open up a HELOC on the property. Despite the cash purchase, I'll still have plenty of reserves in case of emergencies.

I'm thinking the Pros of a HELOC would be that I could use that for buying power of other property, while still maintaining strong cash flow when the HELOC is not in use, and I could have a more stabilized portfolio. The cons would be just not having that cash ready to deploy and my ROI would much, much less.

The Pros of a cash out refi would be having that money ready to deploy (but maybe this point is null if I have a HELOC to deploy) and my ROI would be way up. The major con of a cash out refi is that I have a mandatory payment for 30 years. Cash flow with a mortgage would be about $500, cash flow free and clear would be about $950.

P.S. To avoid the "it depends on your goal" answers - my goal is financial freedom (defined as covering my expenses) with cash flowing real estate in the next 5 years. I have one property already and my wife and live on just her salary, so we pocket about 60k/year after taxes. 

Congratulations! Start of something great!

This question comes up all the time. Here's another thread where we were discussing the very topic:

https://www.biggerpockets.com/...

Hope this helps!

Agreed with the crowd. Painting gives a more modern, classic, sleak, smooth look, so it might help you when it comes to refinancing, or maybe it gets you an extra $50/month rent because the tenant is reminded of HGTV

 @Dan Beaulieu that's my mistake on quoting numbers. I actually don't have a HML lined up yet and was just throwing something out there off the top of my head, now I see it doesn't make sense lol.

I think what I've seen many HML do is they'll do 75%-80% of current value + 100% rehab, so I'd have to come up with 20-25% gap for a down payment. Either I would fund that or get a PML to do that with.

Overall though, it sounds like this forum is saying - Yes, so long as you have the reserves to back up the deal, combining private and hard money is a great strategy. 

@Jody Sperling thanks for the response and the vote of confidence on this strategy.

I definitely understand the risk, and my way of tying to mitigate that risk was if something were to happen and the Deal wasn’t successful, the property would be collateral to the hard money lender and I would have my own cash as collateral to private money lender. In other words, I wouldn’t ever do a deal that I couldn’t cover the down payment with my own cash (keep in mind I have about 100k in reserves of my own).

I’m just thinking through my personal network, and I don’t have many people that would be willing/able to lend out 100k to fund a purchase and rehab, but I definitely know people that might be able to put down 20-30k for the down payment with a hard money loan.

I've finally been able to take down my first BRRRR deal! I've done it with 100% my own money, which was a huge personal accomplishment.

While I'm super thankful for this, it didn't take long for me to realize that doing 1 BRRRR deal every 6 months is going to take a really long time to reach financial freedom. I know using OPM is going to be the way to accelerate my progress. My lack of experience prevented me getting hard money, and it was personal reasons why I didn't want to approach private lenders before.

My question is what are the pros and cons of combining hard and private money? For example, an HML that will finance 75% LTV + Rehab and a PML that will Loan the remaining. That way I'm no money into the deal, have a fully funded deal, and I can refinance at the end and pay back my lenders. I'll have about 100k in reserves of my own on the side while all this is going on.

Anybody doing this that can offer some advice on pros and cons? Thanks!

My mistake, I thought you were purchasing the property originally with conventional financing then trying to sell it as a owner financed. 

Something else you have to think about is a "due on sale clause." Meaning if you sell the property using seller financing, you will have a transfer of deed, and the loan that you have will be called. So you'd have to have the cash to pay for the loan you took out. 

A way around this would be to buy a property using a mortgage, then if you wanted you could sell it using a lease option or rent to own. You can collect initial security deposit, get a rent premium, probably better quality tenants, guarantee monthly income for a few years, tenant/buyer usually pays for repairs and maintenance and you can then sell it at a guaranteed price. The deed won't transfer for a few years, so you can work around the due on sale clause.