Getting cash for first deal?

[Kris Langford]

Hi everyone,

I wanted to ask how you all might proceed if you were in my shoes. 

I have read up on the BRRRR strategy and think this model sounds like my cup of tea. I have a goal to retire from my full time 9-5 job in 10-15 years and build enough cashflow to facilitate this. If I can reach 10k in monthly cashflow I will consider myself retired.

A little background;

I currently own a SFR starter home 3 bed 2 bath in the Portland, OR area(Tigard to be exact). The comps in my area go for around $325k-350k. I have been in my home for 5 years and owe $194k. I have a VA loan so renting this property is not an option unless I refi.

I have talked with the bank holding my mortgage about an HELOC. They said I could expect $55-60k as a line of credit based on 80% LTV. My mortgage would increase by approx $400 per month based on their terms.( sorry I forgot to right down all the terms since I was just inquiring at the time, 3months ago) I'm pretty sure it was on a 30yr fixed.

My wife and I both work full time and have 2 small kids at home. We have very little cash savings, so our only option (in my mind) is to borrow against our only asset, the equity in our personal residence.

My questions are;

If I am looking to acquire my first investment property using the BRRRR model what would be the best first step?

1. Should I consider selling my house and looking to turn the cash into a down payment on 2 separate houses, one being my primary residence and the other an investment property? ( my wife would hate living in a different house, unless it is an upgrade) 

2. Follow through with the HELOC and use the cash to put down on my first investment?

3. same as above, but buy in a market where I could pay cash for my first investment?

4. any other option I am not thinking of yet?

Again I am looking to start down the path of the BRRRR model.

Thank you all for the help. I have already learned a lot from this site and look forward to learning a lot my in order to achieve my goals.

[Susan Maneck]

My mother and I bought our first house together. It was only 15K but required 30K in repairs. It rented for $840 a month. After a year we applied for a HELOC for 30K and used it to pay off our credit cards. The following year when the teaser rate ended I paid off the HELOC partly with cash, and partly with credit card balance transfer. I then got another teaser rate on the same HELOC, I used it to help my son buy a house and paid off some of the credit cards. Next year, I again paid it off, got another teaser rate, bought another house. By then I was out of money, so then I opened up a solo401K rolled my IRAs into it and used it to buy two more houses. I also borrowed money from my solo401K to buy a new house for myself and rented my old house. Then my son decided to refinance his house, paid me off. I then got another HELOC and used it along with the money my son repaid to buy another property that had two houses on it.

I currently own eight houses and have three mortgages. I have a conventional mortgage on my old house which is now rented. I have two other houses which have HELOCs. In all I owe less than 120K on all of my houses put together plus the 30K I loaned myself out of the solo401K. 

Mind you, I'm a professor at a state university, proud of being a life-long public servant, from a family where women were expected to become teachers. Call us the perfect "poor moms." But I did couple fo things public servants don't usually do. First, I was able to opt-out of PERS and instead place my money in TIAA-CREF where I could manage my own investments. I was 55 when the market crashed driving my retirement down to half of what had (since recovered.) I realized if I was going to retire in a timely manner I couldn't put all my eggs in one basket. So when houses in my neighborhood started selling for 30-35K rather than cry about my house being underwater, I instead started buying up the neighborhood. Currently my rents put together come to about 5500 a month. My mortgages payments put together are less than 1K and that includes taxes and insurance on the house with a conventional mortgage.