Get rolling with HELOCs

[Mike Chira]

I'm in the process of buying my first property cash at foreclosure (closing in few days), and my goal is to get as many properties for rent as soon as possible. I read a lot and here is what I understand that would work best... if anyone has a better/quicker way, or if what I'm planing doesn't make sense, please advice me... 

1. I purchased my first property for 75k. Rehab cost 15-20k, ARV 155k. Total in 95k cash.

2. If property gets appraised at let's say 150k after rehab, open a HELOC ASAP for about $105k (70%)

3. Rent the property for $1400.

3. Find another property at let's say 60k. 20k in Rehab and ARV 100k. Total in 80k cash.

4. Use the HELOC to buy the 2nd property.

6. Since I have a different stream of income, I can use the profits from my first property and start paying the HELOC.

7. After 6 months, cash out refi on my first property. If appraised at 150k, loan should be $112k

8. Pay the HELOC (80k - 6 months of rent on first property) let's say 74k.

9. Now I have (112k-74k) $38k + 105K HELOC = $143k

10. Meanwhile I get my second property ready for rent (which is paid in cash).

11. Now with the 143k I can buy 2 properties... 

12. Put all my profits from the 1st and 2nd property into HELOC

13. In 6 months refi the second property and pay the HELOC. How I have 2 properties that I have mortgage on, and 2 payed in cash...

14. RINSE AND REPEAT.

If everything I said makes sense I got another question. 

Can I use the HELOC on my first property to buy the rest? Or after I took a mortgage on it I can't use the HELOC anymore and I need to open another one on each of the properties one by one?

I understand that after I get a loan for each properties they should still cash flow, and if they're no I will sell them after 1 year of rent so I can take advantage of the long therm capital gains. And best way would be to do a 1031. Or if I don't do the 1031 I should do a cost segregation study on the next property to avoid taxes.