Finance first investment property question

[Vicent C.]

Hi guys, 

Another newby here. I've been reading, listening and watching for a few months all over the place. I've been in a few Real Estate Investing Meetings locally here in the Dallas-Fort Worth area and I'm really exited to start with my first property this year. I moved to the states about 5 years ago and been working W2 ever since, but the poor dad rich dad really changed my mentality and find out I'm on the rat trap right now.

So I really need your help on something I have in mind to start investing. So I have about $10k in cash right now ready to go and really started to save few months ago. I calculated all my income and expenses and I will be able to save easily $2.5k a month. At this rate and looking to make the first purchase here in the DFW area it will take me a while to get to the 25% LTV on a lets say $100k house. I have a realtor lined up and a mortgage agent willing to work with me, but I'll need that 25% for down payment. So I own my primary residence and was thinking to do a refinance with cash out of about 30k which will get me to an LTV on my primary residence to 80% so I won't pay PMI.

For this I would be charged some closing cost and my question is if this would be a good idea to get started or just wait saving as much as I can and get my first property later. I've been looking houses for months and in this market you have to commit fast.

[Pearce G.]

I would echo setting up the HELOC, but only as a reserve source of quick cash. In other words, don't use it for a down payment. Use it as a safety net for unexpected expenses.

On your first property, you can't spread the cost of capital expenditures over multiple properties, so when/if something happens, you need to be ready.  As you build out your portfolio, you can start setting aside a capex allowance from revenue.