Property acting as bank roll via HELOC?

[Daniel E.]

Good day everyone,

So I’ve been a BP member for a while now. I don’t post very much because I don’t have the experience or knowledge to help anyone out just yet. However, after reading constantly and strategizing I think I may have finally found a way to get started on this FI RE journey. So here is my plan.

I currently have a mortgage out on my home (3/2 1000sf, so. Cal) VA Loan which stands at 227k at 3.25% - currently house hacking. I've been here for three years now and it's hovering at a conservative price app. Of 280k. I've been going back and

forth on the idea of selling or renting. If I rent I cash flow close to nothing and if I sell I pocket an okay amount for my first deal. However, my close friend which I currently house hack with has recently said he would like to rent the entire property from me. So my newbie idea is to allow him to rent the property and take out a HELOC as a backup fund for any major repairs(just in case). The HELOC will give me some more room financially and can also be applied to cheaper out of state turnkey properties.

Im going to make it my goal next month to try and get a local bank to finance the HELOC.

I know I won't be making much to anything on cash flow but would it be worth it's weight in gaining experience in RE, tax benefits, appreciation several years later, rent increases and bankroll of a cal. Property HELOC ? or is the headache too much?

Any feedback would be much appreciated.

[Anthony Dooley]

A Heloc also increases your personal liability on your house. If the market turns, which it will eventually, you could owe more on your house that it's worth. If your strategy is to buy cheaper rentals out of state, I recommend selling your house and using the cash to buy out of state for increased cash flow. This increased cash flow will allow you to rent somewhere to live, pay off consumer debt, and purchase more rentals in the future.