HELOC or sell and move to invest in STR

[Ken Simms]

Hello all. This is my first post on here and I had a few questions on investing in STR's. We currently own our home ($700k value, we owe $45k) and have one LTR ($450k value, owe $100k) which we get about $1800 a month on. This rental is in a town that has very strict policies on the number of STR's, so for the moment it will stay a LTR. We have been toying with the idea of either using a HELOC on our home to invest in STR's across the country or selling our main house and buying a lesser priced house and investing the rest into these rentals. I am very handy and can do most rehab work myself, so buying fixer uppers would probably be the way we'd go. I also have had good success in buying and selling homes and would like to see where this can take me as my main source of income.

Any tips or scenarios for our situation would be very helpful in our quest into real estate investment. Thank you!

[Avery Carl]

@Ken Simms I wouldn't bother with Nashville. The STR laws are constantly changing and not in favor of STR's. I have had clients get under contract at the beginning of a new construction (you pretty much have to go with a new construction/commercially zoned condo or townhome for it to be STR legal), and by the time the construction was finished, the laws had changed unfavorably for their asset. In the over $100 million in STR deals I have done in the Smokies, I have never had a client run into an issue with zoning or regulations, because as Chuck mentioned, it's a very mature STR market and the zoning regulations are pretty cut and dry.

I own 5 cabins in the Smokies. We utilized a HELOC on our previous primary for the downpayment on one of them and we were able to pay it back from the cash flow of that property within the same year, so that strategy worked great for us. I, too, am a big fan of leverage. With STR's you can get a 10% down second home loan which will give you the most bang for your buck as far as leverage goes, and it does not have to be with a bank that keeps the loan in-house. Although I do recommend working with local lenders rather than national or online lenders.

We utilize the strong cash flow from our STR's to acquire more LTR's. We have been able to grow our portfolio by 20 doors in the past 3 years thanks to STR income. That being said, all of the options you mentioned are great ones, and you have a lot of great tools at your disposal. You'll do well whichever route you decide to go!