All Forum Posts by: Andrew Barrios

Anyone else have an opinion on using the HELOC method? Or how about any opinions on the property I'm looking at? Could it be a worthwhile purchase?

Ah, my misunderstanding. Yes the investment would be 100% financed, however my wife and myself both have full-time jobs and not planning to have children. Our annual expenses are about $20k and our income from our jobs more than triples that. We are on track to retire in 10 years, but see the potential of how rental property could allow us to retire with more income while also allowing is to retire a year or two sooner.

What happened in 2008 was terrible, but it's in the grand scheme of things it's just another market fluctuation. If the market fails, my savings and full-time job can cover the costs until it recovers.

You're right that we like to think we have everything in place to mitigate financial hardships. I've got enough in savings for about 1 year's mortgage. However with $75k available equity to pull from and 20% down payments being <$15k, I'd be less than 50% utilized on the HELOC.

"You're also looking into a strategy where you will be 100% leveraged on a retail property at what could be the peak of the market. Not exactly sound investing principles."

I'd be about 65% leveraged on my home residence, which probably doesn't seem like a great idea, but it's far from 100% and I also make over double payments on a bi-weekly basis. Pulling that amount of equity would only about 2 years to my payoff date.

"IMO, your goal should be to use the HELOC to bid low as a cash offer on one of these houses until the owner accepts your offer."

I thought about that, due to the extra bargaining power a cash offer could have, but it would actually force me to pull more from my HELOC which will probably end up having a higher I interest rate than a mortgage. Is there something I didn't think about in this scenario?

Thanks for replying. I really appreciate the outside opinions. I know there are plenty of things I haven't thought of and having people here willing to share their experience is incredibly valuable.

Forgot a question for everyone. Would it be crazy/stupid to purchase 2 "first" properties considering the fact that we have no experience in this, apart from our own home construction? This way the cash flow would come faster, allowing is to pay down the principal on one in a very short time. 

Would that make financing difficult? Oh BTW my credit is in the 720's and my wife is in the 730's.

Hi everyone. I'm Andrew, I'm 28 and I've lurked around for a bit while trying to gain knowledge and finish building my own house. My wife and I have been talking about getting into real-estate investing for the last two years, but with so much on our plate, we felt that it just wasn't the right time. Now that all of the dust has settled, we are looking to buy our first property.

The goal for us is to buy & hold, fairly local (<1hr away) single family homes to help supplement the income from our full-time jobs and allow us to retire sooner. We thought about duplexes, but there's only 1 in town that's for sale and its in an area I'd rather stay away from. Because we built our house ourselves we've got about $75k of sweat equity in it. The idea is for us to use a HELOC to fund the down payment(s) and use a traditional mortgage for the remaining balance. We would funnel the extra cash-flow into the principal and repeat the process to buy additional properties. The idea is, more cash-flow from additional properties will allow each property to be paid off sooner than the previous one... compounding. Ideally we'd like to be able to produce $1,200/month from rent within 5 years.

I've found 3 properties near my area that I'm very interested in; all in similar price ranges. I've tried calculating the ROI on each, but it was a back of the hand calculation and didn't include cap-x. The numbers looked good... About 30%-35% ROI. However, because the homes are only in the $50k price range and will only rent between $700-$800/month, cap-x is going to take about 15% of total rent.

Here are the numbers in the one I'm most interested in, but all three are incredibly similar. I've scheduled to see all 3 this week and I'm in the process of obtaining the HELOC.

Price: $52,000

Year built: 1965

Beds: 2

Baths: 1

Sqft: 1,045

Tax Assessed Value: $28,640 (Everything is way lower than sell price in the area IDK why)

Estimated Taxes: $56/mo

Estimated Rent: $750

Any idea if this is a worthwhile purchase/strategy? Need any additional information?

Thanks for taking the time to read and respond.

I haven't bought my first property yet, so this may not be any help... My opinion on this is "it depends". It's probably not the answer your were hoping for, but it's the best I've got. It really depends on your risk tolerance. If you're ok having a bunch of debt and it doesn't scare you, then rack it up, but if you think you're going to have trouble sleeping at night because you're afraid of some sort if event that will leave you bankrupt all of the sudden, you should probably keep from accruing a ridiculous amount of debt.

IMHO if your monthly cash flow is high enough to net a positive gain every month, consistently, without fear, your doing just fine.

Being on the younger side myself, I see the current market as a great opportunity. Since I don't have a whole lot invested and I've just recently started aggressively funding my retirement savings, I don't have a lot to lose. For now I'll get to buy low and let the market recover.

For yourself though there's really nothing wrong with the current market unless you are (were) planning to sell. If your still funding your stocks this is just a little speed bump in your portfolio. It sucks watching thousands of dollars disappear over night, but they'll be back in time and then some. Oh and congrats on the property purchase :)

Thanks for the response. I haven't been able to catch a live podcast, but i watch them when I can on YouTube. I've been analyzing deals in my local market, but there's not a lot of potential for positive cash flow. I may have to expand my search. 

I'm glad you mentioned the Meetup, that's something I hadn't thought of.

Hey, I'm Andrew. I'm 27 years old and married with no kids. We're trying to get our foots in the door investing in our first rental property. We live outside of Ft. Worth, TX and before doing a bunch of homework I thought I needed to invest locally, but now my eyes have been opened to the advantages of using property managers in order to unlock more markets. So here's our story...

My wife and I built our own house from scratch and are about to close on a cash-out refinance in order to finish some of the house along with paying off a personal loan we used to help fund some of the building process. The refinance is going to leave us with about $20k left over, after the improvements. Originally we were going to out it back into the principal to pay the house of quickly (like 3-4 years) and eliminate our debt to fund retirement savings faster. Now we're looking at real estate investing as an alternative... We're hoping to use this cash as a down payment to get our first rental property and since we built the house to ourselves, nail by nail, we have another $70k in sweat equity that we could probably use for a HELOC to use as down payments for additional properties. This way we could probably get properties that don't need a lot of work (even if we have the skills to do the work ourselves) and we wouldn't HAVE to use the BRRR method to get a few properties rolling. Although it's a bit scary to use a HELOC, since we'd be leveraging our primary residence that we've put so much time, hard work and emotion into.

At the end of the day it boils down to this... We want to get a property (or a few) to generate multiple income streams in order to more aggressively fund our retirement (especially in this downed market) and then hopefully be able to quit our day jobs. I've got to admit though, it's very intimidating to take that first step without guidance.