Approved HELOC.... Now What?

[Chad Hutchens]

BP Team - 

My Wife and I are new to the RE investing market and have been doing our research, reading articles, analyzing deals, etc. Figured there would be great success stories and the unfortunate fails that we could learn from within this community, so we appreciate any insight and feedback. Long story short, we have our primary home and tapped into the equity through a HELOC... Figured we might as well put the equity to work. Out initial thoughts are to buy properties for long term rentals and potentially short terms (Air BNB's), I am not looking to flip at the moment, looking to start a long term passive income.

After reading a few articles/threads, It seems like the idea is to find a good deal and then use the HELOC for the DP of 20-25% and then update a few items (if needed) to force appreciation and then cash out refi and pay off the original HELOC on our primary.... then rinse and repeat. Does anyone ever just pay in full for a rent ready with their HELOC and then mortgage the rental property with a cash out refi and pay off the original HELOC depending on appraisal? Maybe people pay in full as a negotiation tactic on a deal they find to lower the purchase price. (Maybe not in this current market)....

I know there are a good amount of variables that go into every forum thread/post, but would love some feedback or give insight on success stories they had using a HELOC.

Thanks and looking forward to the dialog! 

Chad
 

[Hoi L.]

When I took out a HELOC from my primary residence, I used it to buy a property (with extra cash added) with 100% cash to obtain the sale (no mortgage/financing worries for the seller), beat out an offer that was 5% higher, before refinancing the rental property at 80% LTV with 30 yr fixed mortgage. I then used the refinancing cash to buy 2 more rental properties. Leverage was key in my acquisition phase of REI for us. However, now with rates skyrocketing, numbers don't work as wellanymore as far as +cash flow. When we started out this REI journey, our #1 rule is to ensure long term +cash flow stability (even if <$100/mo per door) in case we lose our jobs but the rent will always cover for the mortgages/tax/insurance.