All Forum Posts by: Ty Cover

Hi Ty,

Go after the lowest hanging fruit here and do whats best for your next mission. It sounds like paying off the LOC is important to scale. When discussing cash out refi options make sure the broker or lender you are speaking with is crystal clear on the terms, prepayment penalty and so forth. It sounds like your LOC could increase over time as you grow so I would play the chess board in a way that keeps that debt clean and ready to rinse/repeat at all times.

@Ty Cover I'm in your exact position but with a larger, more expensive property. I've just approached my lender about a cash out refi because I forgot to check to see if they did HELOCs on investment properties. I'm only looking to take out about 30% of my LTV because that still leaves it with a solid amount of cash flow each month.

I’ve got a specific property in mind I’m hoping to buy so I’m trying to get ready for that. If you don’t have a specific property in mind then I think the cash out refinance doesn’t make the most sense.

I think in your case if you're able to source additional inexpensive properties then a HELOC might be the best way to go. That way when you're using it you have access to it and then once the new property is rent ready and stabilized you can do a refinance on it if you want to, pay off the HELOC and be ready to do the next one with the HELOC again.

 Got it.

Here's how I think about these things.

1) LOC Opportunistic: when I don't need the funds right away and intend to pay back in short period of time.

2) Refi - Cash out: when cash flow supports it, for longer investment opportunities such as buying a house. Do keep in mind DTI ratios, speak to lender on the impact of the refi to the next purchase.

3) Refi - no cash out: to improve cash flow and DTI ratios. No investment opportunity on the horizon and cash in the war chest for future rehabs or acquisitions.

If it were me, I would take whatever my initial investment was so I am in it for $0. Then consider a HELOC. Reason I would do it this way is if there is a downturn and I needed cash, I have the HELOC or I could still easily sell it. This is just me, I am sure there are plenty of people who would also take the equity out to use for another one.

Hey Ty, 

The groups of lenders doing 80% on a cash out refinance is less then it has been, so it would depend on the state/region that you are in and what lender you decide to go with. Make sure when you do, to clarify what their seasoning requirement is as November is a tight window.

A solid cash-out with a >1.0 DSCR is a great start to your BRRR journey.

@Ty Cover

I'd say it depends on what the next steps of your long term strategy requires. If that is not mapped out, I'd recommend a quick though exercise:

- 10yr goal

- Back into 5yr goal

-Back into 3yr goal

-Back into 1yr goal

-Back into your next step.

This doesn't have to be done in detail, nor fully vetted to 10yrs. The value is in the exercise to figure out what you need to do today to set you up for the next step.

Cool, thanks @Ty Cover! Do you have to be a veteran to get a loan through them?

@Jamie Kleine

I did one for $250k about 1 year ago. Cost about $350... which was the cost of internet appraisal. I went to open an account and put $100 in just to become a member of that credit union.

Based on my research, most banks/credit unions charge a small fee of $400 to $800. That's it. They make money when you use it.

I would keep shopping around, unless you just want the speed and convenience and you got something already lined up.

Hey finance savvy people! We are setting ourselves up with a HELOC to start investing. Looks like the closing cost fees are about 3% of the credit line amount. Does that seem typical for a HELOC of about $200k - so the fees are about $6k? Thanks so much for your help, really appreciate it!