Keep the ball rolling

[Elizabeth Brown]

My husband and I are new to RE investing, and we're looking at a property we want to buy to start our portfolio. In order to purchase this first property, we got a HELOC on our home for the down payment and closing costs. Our question is, once we do this, how do we recoup enough funds to purchase a second property sooner than a few years from now? The property we're looking at will have an estimated $400-$500/month cashflow, but that doesn't seem like enough to pay back the HELOC super quick or save another 20-25% for a down payment. TIA!

[Nicholas L.]

@Elizabeth Brown

it's a good question.  you can obviously... be patient and just save up from your active income.  no one really wants to hear this though... they want the shortcut.

there are also ways to recycle capital, like the BRRRR method, which works but is tough right now with interest rates so high and deals tough to find (and 10 other things, but those are big ones). you can also look into lower down payment options, like a house hack, or a seller finance deal. also tough to find, and not a fit for everyone.

with that said... i have to ask you about the property you're looking at. i'm skeptical that it will 'cash flow' $400-500 a month if you're using a HELOC for the down payment. HELOC money is expensive money... so i think you need to take another look at the expenses and make sure you're including all of them - not just PITI.

and you may know this, but i'll remind you - HELOC payments are usually interest only for the first few years during the draw period. which means that if you're making the minimum payment, you're not paying down the principal AT ALL. you then have to pay down the principal during the repayment period. so, you're trying to force the property to bear the cost of the HELOC - which it probably can't support by itself.