All Forum Posts by: Justin Phillips

When I lived in Hawaii, I desperately wanted to buy a home with the long-term plan of renting it out and having a tax-deductible trip to the islands each year. I ended up realizing that it would be better to find a very solid rental elsewhere and use some of the cashflow to enjoy a nice vacation each year. 
All that to say, analyze the rental suitability in a vacuum. 

My wife and I also faced the sell/keep as a rental dilemma our property recently. We decided that keeping it as a rental, while retaining long-term access to equity was the best of both worlds. We ReFi'd into a very specialized 1st position LOC that's tied to a zero balance sweep checking account. Even at a higher interest rate, our monthly cost actually got cheaper because it's just an interes-only cost. All the while, we're paying principal first with every dollar we deposit. So we have that long-term access to equity, without signing ourselves up for 30 years of higher interest-first payments on day 1. It's been a great option for us, and a helpful tool for us to have in our financial tool belt. We've enjoyed the monthly cashflow and California appreciation, all while having that equity ready for the next opportunity,

My wife and I have a very specialized 1st position LOC on our property down in Murrieta Ca. It's tied to a zero balance sweep checking account, so all deposits/idle funds sit on our outstanding balance, saving us interest cost. Being designed to sit in first position, it carries the staying power more similar to that of a conventional mortgage. It's been a great tool for us, as we plan to recycle the equity many times over throughout the 30 year term. I liked it so much that I left my job in medical sales to join the company that specializes in this loan.
It is a tougher loan to qualify for, and you can only have one on each property type (Primary/Investment/Vacation). For the right person, it's a great tool.

 We got our specialized line through a company called Life Changer Loan. A realtor friend told us about it originally. We got it on our property, and I liked it so much that I left my job in medical sales to join the team. It's not for everyone, but for the right person it's an awesome financing tool. 

@John Philip Eugenio Penfed is definitely a big name in the Heloc game. To my knowledge, they only offer 2nd lien Helocs, so definitely not stable/longterm options. However for a quick Heloc to finance a quick transaction, PenFed is a good option if you don't have too many doors. They have a limit as to how many rentals you can own. 

I'm a big proponent of a very specialized 1st position Heloc that's tied to a zero balance sweep checking account. With that ZBA, every deposit and idle dollar is swept directly towards the outstanding balance. That saves a great deal of interest, so my money is working for me in between being deployed for the next investment. With Helocs and simple interest, it's more about interest cost/time, rather than just interest rate. It's been a great tool for us and allowed us to greatly increase our flexibility and cashflow. 

Nearly all mortgages here in the US technically have an "Acceleration Clause". Which states the lender can call the note due for a variety of factors. In practice, extremely rare unless some major guidelines have been broken. 

Helocs are almost all 2nd lien products, and even most "1st lien Helocs" are simply 2nd lien helocs sitting in first position. Being a 2nd lien product, Helocs are usually the first thing either cut or converted to an amortized loan when the credit market tightens. That's why I always recommend specialized 1st position Helocs. Being designed from ground up to sit in 1st position, they have the staying power more similar to that of a traditional mortgage.

It's always easier to secure financing when you don't need it. Reserves and buffers are always very wise, especially when the market is shaky. 

Hi Colton, congratulations! That is an awesome position to be in and could really be the golden goose for your financial future. 

First thing I'd recommend is to be patient. You have a great opportunity in the casita to get your feet wet in investing. This market is hot, so no need to feel the need to jump in right away. Education is the best investment you can make, and it sounds like you're off to a great start here on BP. 

On accessing your equity, a couple things may give you some trouble. In many cases you'll need 6 months of seasoning to access that equity (at a reasonable rate at least). Also, if you're only 1 year into that 1099 work, underwriters for more traditional financing will want to see 2 years of income/self-employment history. 

My wife and I have are very fortunate to have a nice chunk of equity at a young age on our property. We refinanced into a very specialized 1st position LOC that's tied to a zero balance sweep checking account. That allows us to sit idle deposits/funds on our balance saving us interest, while retaining access to 80% of our equity. When opportunities arise, we simply write a check from our line and finance that ourselves. We plan to use that 30 year access to equity to build additional wealth, and snowball through investments.

I'm excited to follow along with you on your journey here, cheers!

Ouch! Was that purely rate or fee related as well? That is an enormous jump. 

Here's a link from Zillow that might be helpful, Renting a House With a Pool? | Zillow Rental Manager

It looks as though you can add a "pool addendum". It definitely adds some different factors to consider. 

Would your home make a good rental? You'll want to estimate that rental income and look at what that does in comparison to the proceeds from a sale. There's also the capital gains rule, where if it was your primary residence for 2/5 years, then you don't pay capital gains. 
My wife and I were caught in the same Keep as a rental vs. Sell Dilemma. We decided that keeping it as a rental, while retaining long term access to equity is the best of both worlds. We ReFi'd into a very specialized 1st position LOC that's tied to a zero balance sweep checking account. So all deposits and idle funds sit on our balance and save us a great deal of interest cost, while we have that 80% LTV credit line available for whenever deals arise. It's been a great fit for us, as we've enjoyed the appreciation over the last few years, gotten monthly cashflow, and have used our "trapped equity" in some investments.

The answer on what's best for you really depends on the situation. Either way, definitely a great spot to be in with all that equity! 

Heloc balances do indeed affect credit. A Heloc is essentially a very large credit card, with a much better interest rate. Similar impact on credit with usage/availability.