How would you invest a $48,000 HELOC??

Question

Hi, BP Nation! My name is Tyler McEwen and I am located in Johnson City, TN. I am 28 years old, a father, husband, mechanic, welder, and a farmer. I have a great W2 job with a wonderful schedule, but like everyone else I like to make some extra money for my family and this "Financial Freedom" everyone talks about sounds wonderful. Like many other members here I read Robert Kiyosaki's book "Rich Dad Poor Dad" around 3 months ago and it has completly changed my mindset. After finishing this book I have read several other real estate books, analyzed several deals, listened to every single podcast!, spent hours on realtor.com and my local county tax website, talked with local lenders and banks, looked at properties with my realtor, took several notes and I've even made a few offers on a couple houses I thought I could flip. I'm honestly open to any kind of deal.. wholesaling, flipping, or rentals. Long term I would love to buy a duplex or small multifamily (4-8 units), but with that being said I would also like to maybe flip some homes if I can find the right deals. I feel I need to build some capital for these rental down payments rather than using my HELOC for the down payment?? I just recently closed on a HELOC of $48,000...

IF YOU HAD THIS $48,000 TO GET STARTED HOW WOULD YOU INVEST IT IN REAL ESTATE???

Thanks, guys! BP is awesome and I can't get enough of Josh and Brandon's podcast! I've learned so much!!

T.J. Hollars · Answer

I also invest in JC, TN and surrounding areas, my primary goal is buy and hold and am a W-2 earner. You could for sure pick up a small multi unit building with 20% down and do some re pairs with the HELOC. It's exactly how I got started, I now have 14 units and have my next BRRRR under contract to close in couple weeks!Good luck message me if you have any questions.Thanks

Account Closed · Answer

Hello! I'm from JC as well and started flipping houses with an 80k heloc a year ago. Flipping with 48k is possible, but you will need to do the work yourself to save money and it will be difficult to find a deal that returns more than 5-10k. My first flip was probably my best deal to date in terms of roi; the entire project cost around 40k and I made 28k, so it is possible. Total turn around was 5 months but it was my only job... I know another couple who started a flip around the same time, also doing the work themselves, and they are still working on it. Granted their house will be a lot nicer than mine was when finished.The three basic investment options that come to mind are:1- flip- this will be difficult with you working a full-time job and only having 48 to invest.2- brrrr - this is very possible. It is a strategy I would have employed myself before now if I had a W-2 job.3- invest in someone else's project- I would be a little cautious of this one because you are using a HELOC that is tied to your primary residence (I assume). You could partially financed the deal with the first position lien to protect your interests. For example, I sold a house last month that I put a total of 35ish in, and a private money investor put in an additional 23. The private investor got a first position lien on a 100k house. Very secure. Worst case scenario she could have foreclosed on me and more than tripped her money. There is a REI group that meets at the downtown Kingsport Association building every third Monday at 7. You can find other people doing business there if you want to scope out potential deals to invest in. Feel free to reach out if you need any help!

Tyler McEwen · Answer

Long term I would like some buy and hold investments. I think the BRRR strategy would work well if I could find the right deal which seems hard to come by. But with that being said I am also open for flipping to build some capital. I've been searching the MLS several times a day... I've found some HUD homes and other foreclosures but the numbers just haven't came together for me. I've also played around with listsource.com and thought about doing some direct mail marketing to see what I could come across.

Felisha McCurry · Answer

@T.J. Hollars @Tyler McEwen Johnson city investor here too!!! It's a great place to live and invest. Tough right now with the inventory so low! We fix and flip right now while the market is hot, but hope to pick up some more rentals or payof some of the ones I have in the near future.Fix and flip is a quicker way to build capital and then your possibilities are expanded. It's slow at first but then will compound quickly the more you do! If I were you, I would either fix and flip to build up some more capital and then brrrr so you can keep it going.

Tyler McEwen · Answer

I appreciate the comments and suggestions, I'm excited about real estate and all the possibilities it offers. Long term (10ish years) I would like to have enough rental properties to cash flow 3,000 to 5,000 a month. I feel with my HELOC funds along with my personality and work ethic I can definitely make it happen.

Thomas S. · Answer

Your best option at this point in time would be as a money partner with a proven successful flipper to get your feet wet.Once you have more capitol and are burned out with reno and flip you can transfer into buy and hold. To do buy and hold you need a entirely different mind set on the value of cash. Once you understand that true positive cash flow can only be achieved with 100% leverage you will have a leg up on those investors that believe paying off a rental is a smart move. Successful income investment with a goal to achieve maximum cash flow requires minimum equity sitting dead in rental properties. Paying down, or off, on a mortgage is not a investors mentality it is a home owners mentality that will generate no true cash flow. That approach would be better served by parking cash in a mutual fund.

Christopher Blanco · Answer

@Tyler McEwen, having started this process 6 months ago and 2 deals under my belt with 3 and 4 in the wings, I can tell you right now that finding deals on the MLS will be tough. We are in a sellers market with LOTS of competition from people bidding up the prices of properties. I have 4 deals under wraps and not a single one was purchased off MLS. I have 2 probate deals and 2 wholesale deals. I would start some kind of marketing campaign, be it driving for dollars, probate or the like to get off-market deals then start looking for a GOOD wholesaler. They are hard to find, but once you find a good one they will be invaluable. It will be you best chance to make money.

Tyler McEwen · Answer

Jesse Shelton, Thanks for the reply! As for the flipping, I know it may be difficult working a full time job but I would give it a shot. My wife could help me schedule SUBS and take care of things until I could leave work. I'm sure it would be a challenge but I'm up for it! I will most definitely attend a REI meeting, I appreciate you letting me know. I would enjoy getting to know other local investors and learning.

Rick Pinney · Answer

Tyler McEwen where do you want to go with this? Are you wanting to flip? Or buy and hold? What is your goal? I am thinking 30-100 years in the future and sticking to multi family until I can leverage into bigger commercial deals. Fist goal was to get rid of my rent payment. Next is to get rid of other expenses so I can save around 3k a month. And build from there. That is within 1.5 years reach. I am not familiar with Johnson city TN except I heard it in a song once. What deals are available to you? I would first start by talking to locals, and finding a few players in your area. What kind of returns do you hope to get? What is the rate on your HELOC? Are you able to find and buy cash? Then force some equity and refinance? Big fan of Brandon Turner's BRRRR strategy. Either way let us know how it goes and happy hunting! -Rick