First Short Sale advice

[Cory Cox]

Hey Guys/Gals,

I just currently got under contract for my first investment property which is a short sale. It has been EVERYTHING but short but I will spare my thoughts on the company that I am going through on that matter for another time (Day 97 and just started on my end). My question is this...I plan on living there for a year and then renting it out because I only had to put 3% down on the home (105k offer). I plan on going through with the house hacking technique but I'm wanting to scale my homes in a faster way, which makes me think about using the HELOC strategy as well. I figure I will get an appraisal of somewhere close to 130k on this type of home (about 6k in rehab that I will pay for in cash as soon as I close in the house). My cash flow prediction will be around 350/month. I am confused on a couple different things about my next play tho.

1. If I use the HELOC strategy and draw out around 25k for that, that will make my payment (I know it will be two separate payments) for that home to around an extra 250/month which will then make my cash flow to around 100/month at that point. Is that the best play to bring my cash flow down to that small of an amount? My lender told me the rule of thumb is $8-10 for every 1k.

2. If I use the 25k to then put 20% down on another home can I then use the HELOC strategy on that home also and in a sense keep getting my 25k out over and over again on the homes that I use? Which then in-turn makes that next rental home I have a very low cash flow at that point also.

3. If I kept going with this strategy would my DTI ratio be ALL out of whack out of just a couple deals? I have a full-time job right now making around 70k a year now and in a year and a half will be "topped out" and making around 100k at that point...just to add that extra background info if that helps.

I guess what I'm caught up on is the idea of yes, I understand letting leverage scale you faster and your tenants paying your mortgage down, but the fact of having to deal with 3 homes for example of cash flowing 100/month instead of just having the 1 making 350/month and it being an easier route in a sense for me headache wise.

I appreciate your feedback and thanks to this great community I have finally pulled the trigger on my first one!  Wanting to just set up a system that will work in the beginning so that I can then snowball into more and more assets.  Thanks again!

[Wayne Brooks]

One thing is you're not going to get a heloc for 100% LTV. The most you'll get is 80-90%.