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Updated over 2 years ago,

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Rick Albert#3 House Hacking Contributor
  • Real Estate Agent
  • Los Angeles, CA
1,359
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1,856
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Have $200K HELOC: What would you do?

Rick Albert#3 House Hacking Contributor
  • Real Estate Agent
  • Los Angeles, CA
Posted

Hello All,

I would like to get other thoughts on this situation (because more minds means more creativity). 

I have one condo now (equity rich, cash flow poor). It is in LA but once we can raise rents, it will be fine or once the tenants move out, I will consider a 1031 exchange. I could also pay off the majority of the HELOC that I used for the second house hack with cash that we have, which would recast the loan. That would also open up some cash flow but I think it makes more sense to buy more appreciating assets. This was my first house hack.

I'm on my second house hack now, living in the main house and renting out the ADU. Expenses are low. My tenants in the studio ADU are paying almost equivalent to our portion of the PITI.

I now have a $200K HELOC on my house ready to invest, plus some cash if needed (but ideally saving that for an investment property with a business partner unless someone has other ideas). The cash I have allocated is about $70,000.

I am considering heading to my third LA house hack, but our expenses would go up more than double including receiving rent from my now new rental and another ADU conversion minus the HELOC payments. I understand the long term benefits of a third house hack, but I'm thinking it makes more sense to invest elsewhere and keep our current expenses low.

Where I'm struggling is I can find cash flowing properties (out of state), that's no problem, although the CoC returns are low. The issue is once I factor in the HELOC, it is no longer exciting/negative cash flow. I'm fine with low cash flow because I'm buying for effectively 0% down.

I have some ideas but would like more in case I'm missing something. I've thought about apartment buildings under $500K as an option and I've thought about BRRRR but doing it out of state where I can't manage it leave some concern (I have project management experience) and would take away time from my clients/work here. I'm not interested in vacation rentals due to the high costs upfront and the constant legislation changes/additional taxes.

What would you do?

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