All Forum Posts by: Linda Osborn

Before I start here...I am NOT a financial professional, so take everything I say here with a grain of salt & verify with your own CPA or finance professional!! Plus the rules in Colorado on HELOCs may be different than the rules in the state of Texas...and I am speaking about Texas specifically.

With regards to Texas HELOCS, a couple of cautions: (1) In Texas you can ONLY get a HELOC on your primary residence. And (2) you can not get a HELOC if you did a cash out re-fi on the last re-fi of the home. So, you can do a re-fi, then a HELOC, but you can't get a HELOC if you've previously gotten cash out on your re-fi, and you can't get a HELOC if, inbetween the re-fi and the HELOC, you turned the property into a NOO investment. These rules may be specific to Texas, as they bit my husband and me in the rear when we took a small amount of cash out (~$30K) on our primary residence, then 7 years later tried to get a HELOC using the ~$200K of equity we currently have in our primary residence! We found out our only option is to re-fi again!

In general, I like HELOCs over re-fis if you do not need to have the cash in large chunks for long periods of time. So whether you want to use a HELOC and re-fi vs just a cash out re-fi depends somewhat on the intended use of the money.

Examples:

1. If you plan on using a large chunk, let's say $50K, for the down payment on a rental property, and you plan on keeping the rental property for longer than 7 years, the cash-out re-fi may be the way to go. That way your $50K is at a lower interest rate and there is no hurry to pay it off if you decide to keep the investment property longer. 

2. If you plan to sell the investment property in 5(-ish) years or less and/or need a smaller amount of money that you believe you could pay back in 5(-sh) years or less, the HELOC may be the better option. The reason is because you can pay that money off, and once you do, you don't owe any interest any more! The same theory applies if you need money for repairs... with a HELOC you may be able to borrow an amount, then borrow another amount, etc. and you only pay on what is being borrowed... not the full value of the HELOC.

Once again, I am NOT a lawyer, lender, CPA, etc., so check everything! ;-)

@Seyed Javaheri

Check out the BP Blog Post "Introduction to Internal Rate of Return (IRR)" at https://www.biggerpockets.com/renewsblog/2010/09/0... by J SCOTT. There are all kinds of member posts and blogs about this metric. You can also check out "Is the CAP rate the best financial metric? A case for the IRR" at https://www.biggerpockets.com/blogs/6886/45367-is-... by Cass Stephens, CCIM, J.D., MBA, or go searching through the site on your own!

Good luck!

I think house hacking is the best way to start, especially if you are young and mobile. It absolutely is difficult to find decently priced MF in an around the Austin area. Keep in mind as you do your numbers, however, that the closer a property is to Austin proper, the more it will most likely appreciate over time. If you plan to hold for awhile and take a short term loss, you may make up for it in appreciation over time. The reverse is also true, the farther away, from Austin you get, the better your initial pricing is, but you can expect less appreciation so you have to focus on cash flow in the here and now and less on appreciation recovery over time. The absolute best advantage of house hacking is being able to get a low cost (low down payment, low interest rate) loan that also pays for YOUR housing (no more rents!) which bringing in additional funds. Never underestimate the value of your own cost of living in addition to rents being paid to you!!

@Ross Trampler Agree with @Russell Spillers, and I am also a member of the REIA group you are discussing as well as a few others. I will tell you that that meeting you attended in the Domain DID have an Austin Market update...only that didn't start until 8:00pm, so if you got there at 6:00pm expecting it right away, that's why you missed it. Shenoah does do a great Market update meeting, though. The groups mentioned by @Jason Carter are excellent as well and I do recommend you check them out if you have not done so already.

Best of luck!

Both Austin Telco FCU and Randalls Brooks FCU do pretty good HELOCS on owner-occupied. I have not checked on NOO. My only caution is to make sure you speak with someone there who is actually familiar with the product. We had to go back to ATFCU a second time because the first person we spoke with didn't really understand the product and was telling something different than was on the website. We later found out that she was wrong and the website was correct!

Hi Steven,

Although every situation is different and more information about your specific situation would be needed to determine what is best for you, I always prefer the "house hacking" method for new investors, especially if they do not own any property yet. Here's why:

(1) You get to be a homeowner, with all the privileges and responsibilities that entails, and you get to learn about homeownership and maintenance without having to worry about pleasing (or not) and dealing with tenants.

(2) Getting qualified for a loan as an owner/occupier is much easier and requires less down payment than buying investment property, and, as long and you follow the IRS guidelines, any profit you make when you sell may be tax free.

(3) You have the option of buying a home that needs some work (generally cheaper, but also in high demand in this market) and putting in some sweat equity while you live there and/or getting roommates who pay YOU the rent (which is kind of like having tenants, only a little more intrusive).

I wouldn't recommend investing in another city (like San Antonio) unless or until you know the other city pretty well, you don't mind traveling there on a regular basis, and you have a bit of your own homeownwrship experience under your belt.

I'd be happy to discuss further anytime. Feel free to call or PM me if you'd like!

Hi Brendon,

Worst home in the best neighborhood is still true today. Although duplexes are doable, and there is opportunity there, by definition duplexes are located in rental areas, which often do not constitute "the best neighborhood." And although there can be plenty of money to be made there, especially if you are ready, willing and able to do some or all of the fix up work, they are a bit harder to sell because, again by definition, duplexes are generally purchased by investors, which reduces the number of buyers interested in purchasing them. This, however, has not been an issue in and around Austin in the current market! 

I don't know where in town you want to be, but there should be opportunity in all areas...just depends on what you want, how much you can pay, and how quickly you can move (when making an offer). 

I don't necessarily condon talking to a "ton" of realtors, but you should interview several and find one you can work with who fits best with you and what you want to do, and maybe where in town you want to do it.

Feel free to PM me if you have additional questions! Happy investing!

Awesome flip @Michelle Hart; thanks for sharing! I love seeing the great stuff that is done all over Austin!

Welcome to  BP! In addition to BP, there are a lot of other networking and education opportunities in the Austin area. Feel free to reach out if you have any questions!

Welcome to BP, @Hudson Akridge! 

Lots of great investment groups in Austin, including several that have members that specialize in commercial investments. You can find most of them on Meetup, but please feel free to PM me if you are looking for something in a specific area (apartments, self-storage, etc.).