Financing For newbie: Hard money loan and HELOC

[Oriana Gumbs]

Hey y’all

Im a real estate rookie and im itching to start my real estate journey. My husband and I purchased our first home in Dec 2019, we house hacked for the past 2 years by renting out one of the bedrooms for $650/month. This allowed us to get our finances together and we were both able to pay off and pay down some recurring debt. We recently did a cash out refinance on our home for $213k. When we refinanced our house appraised for $260k. With that being said, at a 90% LTV we have about $20k in equity that we could tap in to (my local credit union offers 90% LTV for HELOC), now my question is are these numbers to close or to small? Should we wait and pay down our loan some and build equity first before getting a HELOC? Our finance plan to purchase our first rental property is to get a hard money loan to cover purchase and rehab cost, use the HELOC to cover fees, holding cost, and anything else not covered by the hard money loan, and then refinance the property. We are hoping to find a deal at about $50k/$60k and rehab cost about $20-$30k.

If you’ve read all of this, thank you in advance and any advice/input is welcomed! Also if you see a flaw in this plan please don’t hesitate to point it out.