Financing Strategy for a newbie!

[David Chappell]

Hi Everyone,

I just secured my HELOC ($140k) and I am ready to start putting my money to work for me. I was hoping for some guidance from everyone on which is the better strategy, and maybe point out some things I may have missed.

Here are my goals:
- purchase 2-3 properties a year to hold and rent
- appreciation is nice but not a must have, focusing on cash flow and debt paydown as the benefits
- open to possible rehabs/light cosmetic 
- I want to start slow with my first property, but if things go smoothly I would be ready to rinse and repeat when the right deal becomes available

SCENARIO A
- use HELOC for the 20% down payment and then take out a traditional mortgage for the rest
- POSSIBLE DRAWBACKS - not sure where to get $$ for the rehab if needed. I am assuming a bank would only loan 80% of the appraised value which may not leave $$ for improvements.
- use hard money loan for the rehab work
- refinance into a new 30 yr mortgage to pay off the HELOC plus HARD MONEY? Or keep the HELOC money in the property?
DRAWBACKS - extra fees since I would be paying closing costs twice (for originally mortgage and then the refi). Low odds of getting HELOC money back to put into another deal

SCENARIO B
- use HELOC for full purchase price + rehab
- hopefully refinance after rehab to get the majority of the $$ from HELOC back
- DRAWBACKS - seasoning period of 6 months would only allow me to do a BRRRR every 6 months or so, maybe a little less. Anything else?

Am I missing anything? Those look to be my 2 options so far right now, but I am 10000% open to hearing any other strategies I should be looking at. I just want to make sure I am using my HELOC funds to my advantage.

Thanks so much for the help everyone, this community has been amazing for the short time I have been a part of it. Hoping to gain some knowledge and be able to give back some day!

[John Warren]

@David Chappell most likely your strategy will be dictated by the purchase prices in your area. I would focus more on acquiring a good, solid property for your first one without trying to figure out your system for buying your fifth property just yet! I also would recommend either buying a property that your HELOC can do completely or using a conventional mortgage. Hard Money is not easy to find right now, and it is expensive. A lot of newer investors just don't get how much interest they are actually paying and how that kills returns. I used hard money on my fifth purchase, a six unit here locally in Cicero, IL. Everything that could go wrong did, and I probably would have been in a world of trouble if I didn't have the experience from the first four properties I had purchased!