Closing First Property: How Best to Finance the BRRRR Snowball?

[Rob Barry]

So I'm closing this week on my first SFH and, as you might imagine, quite eager. It was a foreclosure and I paid cash. Purchased it through an LLC, as an out-of-state investor. My team on the ground should have it rehabbed and rented by the end of March barring any surprises.

My goal is to get to $3m in SFH holdings under heavy leverage as fast as possible in my target market (Atlanta), and then re-assess goals and paydown speed. Each new acquisition will probably cost $80-$100k. Though prices are rising, so time is somewhat of the essence.

My question is, how would more experienced investors structure the financing and think about how much leverage to take on and target repayment schedule?

I'd been thinking to start with an interest only HELOC on the first property with a 10-year draw period, and to use HELs from each new property, plus income, to pay it off after each new purchase. Is that what others do? I'm targeting foreclosures for the most part, so traditional mortgages are an unlikely tool for me unless I stray from the plan.

I do have fairly strong business income and a wife whose salary we're learning to live off. I am looking to put at least 60% of my income directly into R.E.

I'm also considering whether to do 15 or 30 year terms on these. This first property, for example, would cashflow about $5k/year at 70% leverage with a 30-year note and about $2.5k with 15-year note. Thoughts?

Thanks in advance.