$200K HELOC - How to invest?

[Matt Hudson]

Hello All,

I'm looking to use an open HELOC on my primary to fund the purchase of my first property. We have a $200k line with a 1.99% apr until July 2020. My initial thought was to BRRR the first property all in, including reno, at $150k. I feel comfortable at that price while trying to stay conservative on the first deal until my risk tolerance raises. If every goes correctly then this would allow me to pay back the HELOC and repeat.

How would you use a $200k HELOC?

Look forward to hearing your feedback.

Thanks!

[Bonnie Williams]

Hi Matt,

First, where did you get the awesome interest rate on the HELOC??? (Sorry, I had to start selfish)

My business partner and I used our HELOCs to pay cash for our first two rent-ready properties. We financed the properties after closing in order to pay down the HELOCs and allow us to continue buying. Buying rent-ready does lock up more cash but, gave us the opportunity to learn how to be landlords.

House three was a complete reno. When purchased it was already down to studs with no electric or water in place. The project when 2 months over due date and I can't even admit here how far over budget it went. Thankfully, it appraised well and we found a renter willing to pay what we needed for the "new" house in the not so great neighborhood.

Having the first two properties working and collecting rents gave us huge piece of mind when the reno (which we were inexperienced with and didn't have the right team in place for) went awry. Of course, everyone's risk tolerance is different and mine is pretty low; starting rent-ready helped me gain a lot of confidence.

We have just hit the end of our first year of business and started with about the same HELOC funds available to us... but with higher interest. Know your numbers! Don't forget to account for insurance, interest, trash service, etc. Treat your tenants (customers) as if they are in a retail store you own and give them a good product. Vet them well, treat them well, and you will do well.

Bonnie