B.R.R.R.R. First Rental

[Jarrod Spurgeon]

Question: Say there's a house that has 2 units in it. They rent for $700 each. On the market for 90k. I think it needs approx. 15k in repairs. 90-15=75k. I offer 65k and they take it. So 65k+15k(repairs)+3k(closing)= 83k. The after repair value is 110k. 20% down (83k) is $16,600. Loan of $66,400. Equity at this point is 110k-66,400=$43,600. I do not have 20% down ($16,600) in cash. HELOC on my primary for the amount. Say approximately 3 months later, house is fixed up and worth 110k, renters bringing in $1,400/month total, loan of $66,400. I refi on the rental for 30 years and pull the amount of money I need to pay my HELOC off in full and add that amount back in to the loan value $66,400+$16,600=$83,000. I should be able to do that cuz house would be worth 110k, 80% refi would be no more than 88k but I have it at 83k. My primary is paid back off so no money out of pocket for me technically. But now I have a house that is cash flowing $1,400/month gross (approx $400 net) and I have $110k-$83k= 27k profit in equity in that house. Then from there, eventually, I would rinse and repeat but use my rental HELOC instead of my primary. Clear as mud? Lol. I know some numbers might be a tad off but I think I have enough cushion to make a profit. Thanks