Blueprint, strategy, map, sketch, plan, or whatever.
Hey, it sucks being lost. What's even worse is having a ton of options, directions, opinions (this one too) that someone can meander and stumble through. I'm new. Right there with a bunch of you. HELOC balance at zero with freshly printed checks. You can smell the new on me. Yep. 100% pure and genuine pleather.
Hey look HUD! Oh, is that Auction.com? Yeah baby, I'm gonna get me some of that foreclosure stuff. Look at all the shiney goodies! Turnkey what?!
Maybe you're one to have 17 tabs open? This post, 4 for Zillow, one for Roofstock, a YouTube video playing in the background that you're barely paying attention to until a keyword causes a Pavlovian reflex in your ear.
Been there. Still there sometimes, following rabbit holes. Yep. Doing, seeing, reading, listening, watching everything at once. Accomplishing JACK ALL. It sucks.
So, to focus. To un-squirrel my day, I made one of those things I mentioned earlier. It's at the top for the scan and go readers.
And here it is. All I ask is for those more experienced to dissect, improve, or simply point and laugh in the comments.
PHASE 1
Initially, utilize HELOC to fund LLC in order to make personal loans to self, for quicker refinancing (BRRR cash-paid properties see BiggerPockets forum “How to: Cash out 1–4-unit Property” by Andrew Postell). The target minimal cash-flow, after expenses, will be greater than three times the max-out HELOC interest payment, currently set at 3.90% and rising. As interest rates are fluctuating, use a base of 5% in the beginning and adjust accordingly when the HELOC interest rate nears 4.75%. Always allow for no less than +0.25% margin of rate rise.
As of 7/1/2022 TARGET after expense CASH-FLOW will be: $1145.79
In my novice opinion, to achieve the target cash-flow will likely require no less than three (3) cash-flowing units and no less than a 9-month time frame.
To locate/purchase/rehab/rent the properties necessary will require local insight as my understanding and knowledge is limited. The local area can only support a small pool of local REI due to population and socio-economic factors, which means name/budget/goals/actions will create ripples in the local REI community. Reach out and try to vet every likely source using integrity and open communication. Narrow down these sources by the options, services and advice they provide. Give them choices that are not 100% in their best interest or in-line with long term goals. Those that have integrity will be honest. Don’t kick the hornets’ nest to see which one doesn’t sting and weed out the “I wash your back/you fondle my balls” type of individual.
Navy Federal refi is preferred due to long standing relationship and low rates. Open accounts with other vet friendly credit unions (see list in e-mail folder for membership links) or with local credit unions if Navy Federal: 1) terms hinder more than help or 2) loan limit is reached.
PHASE 2
Once the target cash-flow has been met, transition with combining 0% interest credit sources and HELOC to scale to 10 units or more. Using the same financial method as in Phase 1, this may double the purchasing power and shorten the time to accomplish the goal of 10 cash-flow units in 2 years. NOTE: 0% credit is for a very limited time. Be prepared to pay up to 24% interest if left unchecked. STAY UPDATED AND TRANSFER BALANCES TO OTHER SOURCES WHEN NECESSARY.
An interesting note of this market is the prevalence of $10k-$20k properties with tenants. The option to utilize HELOC for these properties until refi would allow for growth while mitigating some risk. While the amounts aren't "loan worthy" as individuals, the collection could be rolled into higher interest portfolio, blanket, or DSCR loans. Navy Federal offers 15yr ARM commercial loans, so try Beeline or another lender. 620 credit score, 6-month reserve and .75 ratio are the lowest noted. Most require 660 credit score and 1.25 ratio. DSCR loans do not count towards conventional mortgage limit set by regulations, thereby freeing up financing opportunities and improving personal credit score.
TARGET: 10 UNITS Without the necessary experience, I cannot give a likely timeframe. Theoretically, this could be completed 12-18 months after Phase 1.
PHASE 3
Over 10 units: When conventional mortgage limit has been reached and/or 0% credit sources cannot be used, it's time to use the cash-flow generated as either cash only purchases or as down payments. As noted in Phase 2, this market allows for low initial cost purchase/rehab as well as a chance to break even a BRRR with the right property. Cash-only to refi is a shorter and less costly path, but it limits opportunities for scaling. This Phase will be in continuous rough draft until a better understanding of the opportunities that exist and a greater amount of working experience has been achieved.
There ya have it. Short, sweet and self-aware.
This is printed out and in a binder full of info pulled off the Google machine. Hopefully the binder will get thinner and this "Blueprint, strategy, map, sketch, plan, or whatever" can be more focused.
Happy hunting!!
