All Forum Posts by: Kiran Vemula

HELOC. Even if you don't get fancy with it, you'll save tons of money and have access to more. Don't compare interest rates, compare velocity.

You want to have access to emergency cash for issues with the rental, so you'll always be setting aside a portion of the rent to that purpose rather than paying it back to the mortgage. If you have a HELOC you can pay it back to the "mortgage" thereby lowering your principal and reducing the interest charged. It snowballs quickly and before you know it you've paid off the property in 5 years, or completely recharged your buying power, however you view it.

One thing, if you haven't found a first lien HELOC, go get that instead. It's more efficient and really supercharges cash flow. Best of luck!

Hi @Kiran Vemula- the safe general answer is- it depends. At the current appreciation (which I would have a local realtor run an actual CMA on as Zillow is typically 5-7% off) you have the potential to pocket nearly $100K after commissions and closing costs (I'm in CA and I typically estimate around 8% total commission/closing costs for my Sellers).

If you were to go with the HELOC option, at best you would be able to secure a line that brings your Loan to Value (LTV) to 85% though its typically closer to 70-75% depending on your lender. With this being the case, that means that the most that the lender will give you access to is 85% ($205,600) of $257K minus your current balance of $138K which yields $6,600 under the best-case scenario. Under the worst-case- 70% LTV- scenario this would bring the max total loan to $179,900 (70% of $257K) you would at best have access to $41,900 ($179,900-$138K).

The other piece to factor is the amount of time that it takes to secure a HELOC which is averaging anywhere from 3-6 monhts (I'm currently nearly three months into a HELOC application for my rental). With all this in mind, I would have to second @Brendan Miller's recommendation of heavily considering selling as it doesn't sound like there's much cash flow to offer an attractive reason to hold.

The only other piece of this puzzle is to determine what your goal is so that you can effectively leverage the gains. I'm not familiar with the markets in Jacksonville but will defer to you and a local realtor to assess what type of investment would help you achieve your goal within a realistic timeline. Hoping this all helps and definitely wish you the best with whatever decision you make. Congrats on a great first investment!!!

@Kiran Vemula I just did the same, sold a luxury condo that I used as a primary for 2 of the past 5 yrs, and rented for the last 3. It had a high HOA so it didn't cashflow well but it had appreciated a lot since I bought it. I recently closed on it and plan to roll the proceeds into a down payment on a multifamily property. You're in a good market, so I'd recommend doing the same and find a property (or several) that cashflow well.

Not knowing the address it's hard to know for sure but $1625 seems low for a 3/2.5 in Jacksonville, most areas I'm familiar with.  And I'm assuming "lived there" is past tense, as in you're not house hacking there.

One way to get an idea of where rent should be is Rentometer or BP's rental estimator, and to cross check that you can go to various RE sites and map rentals and compare rent prices in your area.  I suspect what you're facing here is too low of a rent but that's gut speculation, not math.

If the rent proves out to be right for your area and the cash flow is still as light as what you describe, in a market like this selling would bring on significant equity capital for a more carefully planned deal. If you find rent is low, raise it for the next lease cycle, HELOC, and get what you can with the resulting cash.