HELOC & Refinance to build a portfolio!

[John Ted Kenney]

Interested in connecting with folks who have had the experience of purchasing properties utilizing capital from a HELOC, then refinanced the houses/or multi-units to purchase additional properties, and then continued this cycle to build a portfolio. Any tips, tricks, or advise would be greatly appreciated! We got an incredible deal on a house during COVID that has since appraised for double its value. As a result we have been able to access a fixed HELOC from a local bank for $200K. We have been aggressively looking for multi-unit properties and duplexes, but have considered investing in retiree friendly single family as well. Would love to learn about similar experiences and any advice on the process of building a portfolio of rentals in this way. Thank you!

[Benjamin Aaker]

I'm a huge fan of lines of credit on equity. They give you access to capital that you can use right away when you need it. Unlike a refinance, you aren't paying interest until you use the money. They take a bit to get up and running, so I get them going whenever I have enough equity in a property. Usually, that is quick, because I purchase multifamily properties that have some distress and raise the rent. At this point, the value increases and it appraises high enough that I have equity I can pull out. This is done about 1 year after purchasing the property (called seasoning). When I get a line of credit on a commercial property it's called a business line of credit. I need to make sure that the interest paid on the LOC will be less than what I'm getting for income so that I can pay down the LOC over time, not just pay the interest. If you keep these things in mind, you'll be able to grow quickly. Talk to your local commercial banker and good luck.