HELOC to Flip to Buy and Hold

[Steve Cady]

I am finally getting over my analysis paralysis and ready to start my journey. Ultimately, my goal is to build up a portfolio of buy and holds to generate enough cash flow to live on but as long as I’m working, I don’t need any cash flow right now. I wanted to get people’s opinion on my strategy on how I am planning on doing it.

I am in the process of getting a HELOC on my primary residence. My plan is to use that money to purchase a fix and flip for "cash". Initially, I will only look at properties where the HELOC is enough to cover 100% of the purchase, repair, holding costs, etc. Once that is property is finished and sold, I plan on paying off the HELOC, saving 100% of the profit on that sale and repeating the process until I have enough saved to purchase a buy and hold rental property. My hope is to keep that process going (HELOC for flips, profits for buy and holds) until I have enough rentals cash flowing to replace my current income. At some point depending on how things go, I may slow down on purchasing the rentals so I can build up enough profit from my flips to support 2 or 3 flips running at the same time to get to my goal quicker. I am going to start off slow (maybe flipping 1-3 properties a year) until I get my feet wet but may increase that as I get more comfortable.

Does that sound like a realistic way to go?

Another question; since the money I plan on using to purchase the rental properties isn't technically out of my pocket but from the profit of the flips, how would that payment work toward the ROI/CoC/CapEx/IRR etc.? Would it be considered costing me zero of my own money or would I count that money as my investment portion into that property?

Thanks all!