Pay cash or use HELOC

[Scott Suryan]

I have a property that I am in the final stages of title work that I will be buying.  It is a 2/1 in in a "C" neighborhood.  The cash price is $58K.  The tenants are long term and they have no desire to move anywhere else.  They are willing to sign a two year lease and go from $950 to $1050 a month and they pay all utilities.  The inspection came back with fixes but nothing that is immediate and can be done over time nothing needed immediately that is more than a couple of thousand dollars in all.
My dilemma is do I pay cash and have a property owned free and clear that is kicking off almost $500 a month in free cash flow (after reserves for maintenance and cap ex and taxes/ insurance are taken out too) or do I use the HELOC and save my cash? HELOC rate is 8.99%. I have more room in the HELOC for other REI down payments etc.
I am leaning toward paying cash but want to know if I am missing something.  Thank you for your feedback.

Scott Suryan

[Drew Sygit]

@Scott Suryan how fast do you plan to grow?

If you keep buying, you'll use up both your cash and your HELOC.

Why are you buying such low-cost properties that are difficult to get a mortgage on?

You may want to consider targeting $80k+ properties, so you can leverage your funds and buy more.

Questions about this property you should be looking into:

1) Does it have Detroit's required Certificate of Compliance?
https://detroitmi.gov/departments/buildings-safety-engineeri...

2) What qualifying info are you getting on the tenants? Or, are you just believing what the seller is stating about their payment performance?
- Ask yourself, what conflict of interest does the seller have in providing this info?

3) Will the seller sign reps & warrants to personally guarantee the Rent Ledger?

4) Detroit Water Dept allows tenants to create their own water account, taking ALL liabiluty off the owner. Do these tenants already have this? If not, why hasn't the seller taken care of this?
https://detroitmi.gov/departments/water-and-sewerage-departm...

5) DTE has an ATS program you probably want to sign up for:
https://www.dteenergy.com/us/en/business/billing-and-payment...

Contact us with any other landlord-tenant concerns.