All Forum Posts by: Brian Kwan

@Jibu V. Good point, so just go ahead and start paying the Principal back from the start, using the cash flow. And then refinance. Makes a lot of sense!

@Tony H. Wow thanks for your real-life example! Yeah, I don't have a 1% payment every month.. but valuable lessons in your scenario for sure. Makes sense that you'd want to keep the books separate. Thanks bud. 

@Jibu V. That's interesting.. I'll do more research and make sure I'm doing things right. Thanks for clarifying the refinance with the fixed rate conventional mortgage- makes sense even if it lowers my cash flow. 

@Thomas S. that's exactly what I was leaning towards, thanks for the affirmation! So this won't need much renovation. After the seasoning period, would you cash-out refi to pay off the HELOC if it appraises for enough?

@Lesley Resnick Thanks for helping to process this with me! You were truly helpful.

@Lesley ResnickAh gotcha. So.. I heard that the tax law no longer allows us to write off the HELOC interest rate.

https://www.irs.gov/newsroom/interest-on-home-equi...  

IRS Example 2: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home. The loan is secured by the main home. In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home. The loan is secured by the vacation home. Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both mortgages is deductible. However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the vacation home, then the interest on the home equity loan would not be deductible. 

Am I interpreting this correctly? I believe we can write it off if we make improvements to our house, but not to acquire another.

@Jibu V. yup, I just have some cash to use. So I'm trying to figure out whether I should use a HELOC/ cash hybrid for the down payment or just a HELOC. Thoughts?

Thanks @Jim Blackburn, @Lesley Resnick! So you two would use HELOC- and that's what I've heard.. I think what I don't understand is why not use the HELOC for emergencies instead of cash? As in, why should I pay a variable HELOC interest to use for a down payment when the cost to use my cash is free and it's sitting around not doing anything anyway? I appreciate your thoughts!

Hello,

There's a duplex that's going for $250k, with gross cash flow at $1900. Vacancy at 7% ($133), Insurance $70, Maintenance / CapX at 7% ($133), Taxes $75. 

I've got a HELOC that lets me borrow up to $63,000 at a Variable interest rate of Prime - 0.25%. Today that means it's 4.75%.

If I use the full HELOC for the down payment, that's $250 / month in payments, and that'll give me $188 in net cash flow after all expenses.

I've also got maybe $30k I can put down, which will increase my cash flow by about $125/ month. 

So, my question is- would yall make the down payment pure HELOC? Or put down more of my own money for more cash flow?

How do you calculate cash on cash when you're using a HELOC for a down payment?