All Forum Posts by: Drew Clayton

@Bernadeau C., the HELOC would be on my primary residence. They were all based in California: Logix, Kinecta, etc.

@Rich Hanlin, that's such a good point. I'd heard that at some point, but forgot all about it. I did speak to one credit union that said they only do "external appraisals," for homes worth <$2M, where they just look at comps. Unfortunately, that CU was only offering HELOCs up to $50k, so not super useful. 

Part of the thing with a HELOC is that I don't plan on ever utilizing the full amount at one time so I'm not maxing out my available credit, thus tanking my credit score.

Thanks, @Stephanie Medellin and @Cindy Bacigalupo; that was probably something I should have mentioned in my prelude: my investment strategy. Yes, I'm focused on BRRRR, so the hold period for an acquisition would be relatively short compared with a long-term hold. That's what drew me to the HELOC option in the first place, the ability to keep redeploying the same funds. Of course, that redeployment also works with a cash-out, but I'm paying for it whenever I'm not using it.

Is there any additional factor I need to consider since this is my primary residence, though, or is it all just emotion and fear because of the sentimental connection on using one's home for funds? 

@Cindy Bacigalupo, short-term investment meaning doing the purchase soon? That's the hope. Like you, I'm not stoked on adopting a higher mortgage that I'm paying for months with additional pressure to find a purchase.

That's helpful, @Jason Wray. I've heard of people making their HELOC funds do the heavy lifting for the down payment, but I know the current state of things has been changing lenders' requirements.

I'm stuck in decision limbo on whether to use a HELOC or cash-out refi on my primary residence to fund my first investment property

I know all the basic benefits of the two options, HOWEVER ... I feel like this being my home and my only current property changes the risk calculation compared with if I were considering the same equity liquidation on a different property. 

HELOC seems a little safer, only because I'm not locked into increasing my mortgage should things go south.

Background:

• I have a good amount of equity in my home (owned for 9+ years)
• No specific plans to sell anytime soon
• I have good credit
• W2
• Already at a historically good mortgage rate (3.8)
• Don't have a specific acquisition property on the hook yet, but plan to in the next couple months

I've already found some local credit unions who are still doing HELOCs, but the turnaround time is 30-45 days. There are a ton of institutions out there who'd love to do a refi right now. 

Thanks for your insight, BP brain trust

@Brian G., great question. Have you reached out to a lawyer and a CPA about this? I'd love to know whether with investing out of state, since you're likely to owe taxes in that state (possibly as well as where you live, depending on local laws), it matters which state the agreement is notarized in or if you need separate agreements for each state. And if an LLC, does that need to be registered in the state of investment, or just somewhere with low taxes (the classic Delaware filing)?

Thanks, @Tim Herman. That's exactly what I needed to know. 

@Tim Herman followup from my earlier question:

Are the purchase price and rehab cost fields broken out separately because BP assumes that the users is not bundling the rehab costs into the loan amount (e.g. as part of a private/hard money loan)? This seems to be the case, since the closing costs field comes before the rehab field, and one can generally estimate closing costs off of a percentage of the loan amount.

If I am bundling the rehab costs into the purchase, should I just account for the loan amount (offer + rehab) in the Purchase Price field, then leave the Rehab field empty, but calculate closing off of that number? I'm assuming in this that the percentage I select from the drop-down for down payment is being taken into account by the calculator.

Example (assuming single loan for purchase + rehab): 

Offer: $150,000

Rehab: $80,000

Purchase Price = 150000+80000 = 230000 (leaving rehab field = 0)

@Tim Herman, thanks for your help. It turns out the family took an offer from a realtor who the attorney who created the will knows while I was still analyzing. But it was a great learning experience trying to run numbers under the gun. A realtor friend of mine says he often gets pocket listings from attorneys. Looks like I need to make some new connections in the law field.