Financing first rental purchase

[Sam Poland]

Hi everyone,

I'm still relatively new to the idea of buying rental properties, and I'm having a hard time seeing how the payoff plan would work. My family and I live in Taipei, and we own a house in Massachusetts. We have close to 400k in equity in that house, and we are cash flowing like crazy there. It seems obvious that we should be leveraging the equity in that house, but, as I said, I don't exactly understand how we would make the money work for us in the best way.

It seems like using a HELOC to BRRRR would be a really obvious choice, but I'm wondering how we would go about paying back the HELOC. It makes sense that the rent from a place that we rehabbed would pay for the mortgage after we refinanced, but what do people do to pay down the HELOC and not get crushed by interest. Our current loan on the house in Massachusetts is 3%, so whenever I try to run numbers, it is clear that we would pay way way more in interest by switching to a HELOC. Because it is a non-residence there is no way for us to keep that extremely cheap loan.

Do people just use any extra money after landlord expenses to slowly pay down the HELOC? Do people put the money from the refinance in the HELOC to keep the interest payments down until the next rehab purchase?

Finally, I'm just wondering what people use to run the numbers on this stuff. I know that we should get our equity and money working for us, but there is certainly a cheaper way to do that too, and we could use some help trying to figure out different payoff plans, loan options, etc.

We'd appreciate any help anyone can give, and we're grateful to be a part of this community.

Thank you all!

Sam