Best Way To Start With Finances

[Justin Frye]

Hello everyone, hoping you more experienced investors can give me your input on beginning finances. First off I have done zero deals as far as investing goes but my wife and I are currently planning and preparing to get started.

We currently have our personal residence that has not yet been renovated. We have around 40k equity in it now and feel that if we were to sink about 20k in it, it would appraise at around 90-100k in equity.

My question is should we aggressively save and use our money for down payments and hope for conventional mortgages to come through? My thoughts are to throw 20k in our personal residence and then get a HELOC on it and then BRRRR our way in to the buy and hold strategy. Possibly use the HELOC to do a few flips in the beginning to have liquid capital plus the HELOC.

After this last bill is paid for we will be able to save at minimum $3500 a month.

I feel that the HELOC will get us more funds at a faster rate. I also feel that getting the HELOC at current prices would be more beneficial than during a possible upcoming downturn. Am I thinking correctly in assuming this?

Sorry for throwing so much at all of you in one post. I will be eagerly awaiting your answers! Thank you in advance.

[Account Closed]

Justin, 

First of all it is very common for people to want to buy and hold. It is taught in all the forums here and 99% of the people out there who say they are Gurus tell  you to buy and hold. I have made tens of millions of dollars in real estate only to lose it when the market turned down in Vegas back in 2007. We had the worst recession on record. I had one property drop from $30 Million down to $3 million. I saw condos that sold of for $150K that would rent for $1,300 a month drop down to $50K. What most people do not understand is that  Buying and Holding is a deadly strategy and is high risk. Not to mention when a tenant does not pay and damages the home on the way out. It works when the market is headed up but not when it is headed down. Take it from one who has over 35 years of experience. I have see the up and down cycles in the market. 

As far as your personal home. Renovate it and sell it and pull the case out. Then because you can buy another home at wholesale pricing. This allows you to get into a cash position with money to invest and to have equity in your next home. Do this asap because you are coming into the best time of the market to sell. 

There are only two strategies I recommend contrary to what everyone else will tell you. You flip to build your wealth and the when you are wealthy you can lend to cash flow and reduce risk. 

You need a team around you. You need a good attorney, a good Mentor, a good Real Estate Broker. You need people all around you who are buying and flipping and lending so that you have a network of individuals who are doing the same thing you are doing.