Seeking Advice on Financing Future Rental Property Projects

[Keith Angell]

Hello everyone,

I’m looking for some advice as I plan the next steps in my real estate investments. Here’s a bit of background on my current situation:

• I own one rental property that generates $1,900 per month in rental income, and it is paid off ($300K).
• My primary residence is also paid off ($288K).
• I’m currently building another rental property with cash ($200K). Rental should be $1,600 a month.

This year, I plan to build one more rental property, and it will require financing. It will be an identical home to the one I’m currently building, and I expect to need no more than $160K in financing.

I’m not looking to overextend myself by taking on too much debt, but I want to make sure I’m approaching this in the right way. 

My question: Is using a HELOC the best option, or should I consider refinancing my home for a 25-year term and putting all my rental income toward it? With my rentals generating around $46K net annually, I'm hesitant to take on a long-term loan just to keep payments lower, so I'm leaning towards a HELOC. Am I on the right track with this approach?

I’d really appreciate any insights or suggestions!

Thanks in advance!

[Keith Angell]

@Jaron Walling I appreciate the response! I’m still working the 9-5 but have the long-term goal of retiring in 10-12 years. I’d like to have 3 single-family homes and the 5-plex paid off by then, which would give me some solid passive income. My wife and I are also moving overseas when we retire and will add our home to the rental pool. 

I have the 5-plex plans. I haven’t gotten bids yet (build is too far away), but I’m hoping to keep it under $300K by subbing out the work myself.

I’m not a huge Dave Ramsey fan, but I do lean toward being conservative and avoiding too much debt.

I like the idea of using a 15-year loan for the best rate, especially since I'm aiming for long-term stability. I hear you on the HELOC for short-term lending and refinancing. I'll keep that in mind for the next build, especially with rates where they are now. You're right about the value of leveraging equity strategically.

I’m excited about the progress so far, and hopefully, we both keep crushing it with our investment goals! Good luck with getting your first rental property paid off! Keep me posted on how it goes. Cheers!