How to grow with a HELOC?

Question

Hi everyone!
Long story short, my fiancé and I house hacked a 3 family for a few years. We bought another duplex to house hack this past February, keeping our first 3 family.
We are cash flowing $500/mo at the first 3 family now that we are moved out and when we move out of the duplex we will cash flow $500/mo from that one as well.
We have 2 open HELOC's, one on each property for $30,000. We have an FHA loan available to us that we would like to buy the next property with.
To use the BRRRR method and use the HELOC to purchase more properties, how do you continue to cash flow well when you now have another mortgage to pay?
Also, we are having a hard time in this market using an FHA loan.

We just feel stuck. Our goal is at least 2 properties a year. Thank you for an recommendations or advice.

Craig Anderson · Answer

It depends on your plans. Are you BRRRRing and house hacking that one, or just for rental? Are you buying another property with the FHA for your primary and not house hack? Depending on your situation, it might be best to house hack again with the FHA, and collect your cash flow of $1000 a month. Save the CF money, don't spend any of it, and save for the BRRRR on your 4th property. Then, continue with the BRRRR method at 2 properties a year.

All investments are based on each individuals needs and their goals. Ultimately, you'll need to decide on the best approach that suits your needs. Good luck!

All investments are based on each individuals needs and their goals. Ultimately, you'll need to decide on the best approach that suits your needs.  Good luck!

Sadierose Saucier · Answer

@Matthew Crivelli I am starting to realize that! I will definitely keep your number for the near future, thank you!

Matthew Crivelli · Answer

I would start using private money to purchase new properties. It's much easier to scale using non conventional financing. We are not looking at DTI, employment, or taxes. You can use a HELOC for the down payment, close time are much faster, we give you the money to fix up the property and when you go to refi you have access to higher leverage. Banks can't compete with us.

Bill Couture · Answer

Hi Sadie. Is it possible to refinance a private/seller-financed mortgage into an owner-occupied FHA mortgage? It sounds like your goal is to use your HELOC's short-term but to not be stuck with those monthly payments into the indefinite future. I'd recommend finding a property that the BRRRR method will work on where you'll obtain enough funds in a cash-out refinance into an FHA mortgage to pay off the HELOC's that you used for part of the purchase and the assumed renovations. You can use a private/seller-financed mortgage to purchase your next property.

I'm doing this right now on the four-family at 45-51 Aldrich Ave. Purchased for $195,000 in May 2021 and used a hard money lender to finance $152,000 of the purchase. Spent $20,000 in renovations and will be closing on the cash-out refinance at the end of this month (6 months since purchase). Used cash for the down payment and renovations but could've used a HELOC to achieve the same results.

Appraised value is $265,000 and getting a 30 year fixed mortgage at 3.875% for $185,500. It's not a perfect BRRRR where I'll get all of my down payment and renovation funds back but it's pretty close!

Bill Couture · Answer

Hi Sadie. Yes, you can call me at eight six zero three six seven seven nine zero seven

Sadierose Saucier · Answer

@Bill Couture hey! I honestly wouldn’t know where to start with looking into a private/seller financed mortgage. If I were to use that instead, what would the benefit be to re-financing into an FHA? The only reason we want to use FHA is for the low down payment of course, but the long term PMI and high mortgage payments are of course unappealing. In 2017 with our 3.5% FHA we could still cash flow but now it’s really hard to find anything. We just figured this would be our last chance before getting married and dealing with living in another rental that maybe we should do it again. You’re a loan officer right? Would you be available for a phone call sometime this week? Shoot me a text if you can! Thank you!

Sadierose Saucier · Answer

@Craig Anderson getting another FHA to O.O and then cash flowing on the first 2 is our current plan. I just wanted to make sure we weren’t overlooking something that could work better. I’m just timid to use the HELOC’s for our down payment on the next one because that will take away some of our cash flow having to pay that back. So maybe we should save up to pay cash for the closing cost/down payment one more time and then use the HELOC’s when we know we can recoup our money more quickly. This next property was most likely going to be our primary residence for awhile, not another multi. Lots to decide! Thank you for the response!

How to grow with a HELOC?

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