All Forum Posts by: Ashley Noethe

I think the answer to this question is largely "it depends."

If the numbers on the investment property are good enough to cover the HELOC payment, then I personally think it's a great option to use to expand an investment portfolio if you have equity in you primary residence to leverage. I'm all about leveraging primary residence equity - it's how my husband and I got our start. That being said, yes, it is of course a risk.

I have experience doing a cash out refinance on our primary residence for down payments on investment properties as well as using a HELOC for a down payment. As mentioned above, you cannot just use a HELOC as a down payment without additional hoops to jump through as it affects your DTI. One option is to borrow against your 401K and then close the HELOC after the fact to put that money back (that's what we did). We used a HELOC on our primary residence to purchase a short-term rental in Georgia. We actually ultimately ended up just refinancing it back into our house because that made more sense numbers wise, but it can be done. It's all depends on the numbers and the property itself to determine if it makes sense or not.

Hi Jason! Congrats on deciding to get into rental property investing! We own a 5-plex in Indianola and a few other single-family rentals through seller financing throughout Iowa (as well as an airbnb in Georgia). It seems people here have touched on a lot of great options for real estate specific books, but I'd also add I think some more general entrepreneurial/mindset books would be great as well. For me personally, I think reading those sorts of books got me fired up and more willing to take on risk and go after those big dreams. This may seem silly, but an absolute favorite of mine was You Are A Bad*** by Jen Sincero. Definitely helped me get over some mind hurdles. We are somewhat local to you, so feel free to reach out whenever or I'm always willing to meet for coffee. Best of luck!

Yes! Definitely recommend tapping into that equity to build your investment portfolio! We've done it two ways -- a cash out refinance and a HELOC. You'd just have to run the numbers to see what makes the most sense. The cash out refinance is nice since then you just have one payment. The HELOC can be nice since once you pay that off you eliminate that payment, and you also have that line of credit available to use again without needing to do any other refinancing. I'd recommend connecting with a lender local to you who can crunch the numbers for you. There is also the interest rate factor these days. We did a cash out refinance for a down payment on a 5-plex .. but that was also a different situation where the refinance actually ended up being a lower rate than what our initial mortgage loan was .. I assume that likely wouldn't be the case now. When we used a HELOC for a down payment - the HELOC monthly payment was high and eating a lot of our profit so we actually ended up refinancing it back into our house. Again, just depends how the numbers work out. In a nutshell though, yes a second mortgage (in my opinion and experience) is a great way to finance an investment property when you have excess equity in your primary residence.

My husband does some creative financing deals and has some connections to investors who might be looking. Feel free to keep me in the loop around the Des Moines area.

For maximum cash flow, I'd go multifamily. We started with a 5-plex as our first investment property and from a cash flow standpoint it remains our best property. We initially used property management and now are just self-managing since we live close by and it hasn't been too challenging. As mentioned above, you can also use FHA financing for up to 4 units.

Hi @Elite A.! Congratulations on your decision to enter the exciting real estate industry! That is excellent that you are getting your start in real estate early, I wish we started sooner! The Des Moines metro area is a great place to live and invest in. I am a realtor in the Des Moines area and my husband and I also own a multifamily (5-plex) in Indianola and a few single-family rentals in Iowa we seller financed. We also own a cabin in Georgia as a short-term rental (airbnb). Our multifamily performs great and multifamily in general can be such an excellent real estate investing method to maximize cash flow. Have you considered "house hacking" (buying a multifamily and living in one of the units)? This could be a great way to get your start and since it would be your "primary residence" there are great options available for financing it. Feel free to reach out anytime! Always love connecting with local real estate investors!

I am in Iowa in the Des Moines area, and though I'll admit I'm jaded because I live here and am not overly familiar with other states, I would say Iowa is an excellent place for new investors due to the affordability of real estate and low cost of living. The property taxes are high, but I feel the other pros make up for that. 

If cashflow and slow appreciation is your goal, I would recommend focusing on multifamily. We own a 5-plex we purchased for $125K and gross $2305 in monthly rent - compare that to a single-family where you would get between $800 and $1200 in monthly rent depending on the location and property. 

As many have said, it all depends how you structure the agreement, that will make or break whether it makes sense. Often times a nonrefundable down payment is collected which holds the buyer more accountable to their word. Generally, the buyer is also responsible for maintenance. In terms of appreciation, you can account for that in your final purchase price in the contract. Lots of options. We are doing a lease to own with a property we recently finished renovating - we collected a $500 application fee and will be collecting a $10,000 down payment. You would be surprised how many different situations there are that put people in a scenario where they need to lease to own for a while before obtaining a loan - it is not necessarily just people who are financially irresponsible. The biggest thing to consider is if you are up for taking the proceeds a few years down the road and having to find a new property to invest in rather than sitting on this one for longer. If that tenant backs out of the option and moves out, you then replace him/her with a new tenant and are in the same boat as you would have been doing a long-term rental anyway.

Hi Stephanie! My husband and I are new to investing and our first property we bought last October was a 5-plex. You can absolutely start with a multifamily. Like other above me said, we felt multifamily helped to mitigate our risks because since we have 5 units if a 1 or 2 are vacant we still have enough rental revenue to cover our expenses. From crunching the numbers on other deals, we also found that we are able to cash flow much better. All that aside, we are in an area that we were able to get 5 units for much cheaper than 300K so of course it will depend what you can afford. We also both work full-time and have 2 little ones so we have our property managed and there's more than enough cushion for that and we aren't the ones dealing with the tenants.

We use Weichert Realtors - The 515 Agency and have had a good experience thus far. Their fee is 8% gross rent and 50% first months rent for placing tenants.