All Forum Posts by: Michael Bishay

Quote from @Michael Bishay:

Hello Fam! 

I got a HELOC on my primary residence for about 400k. I was thinking I can use those funds for the down payment and closing costs for turn Key properties in Ohio. Then renting them to Section 8 Tenants. I figure 25k per property can get me to about 16 SFH (Give or take).

Any opinion on this? 

Hi Michael,

I like your thoughts of building a large portfolio because it's very important in sub $100,000 markets like Ohio.

A large portfolio = A safe portfolio.

Personally, I've always been a big believer in buying with cash.

Less is more.

Once you gain experience and understanding the true income vs expenses of your portfolio.

Then look at using leverage for faster growth.

It takes many years to learn a market along with establishing a solid understanding of it's "in's and out's" from a people/team perspective.

As investors we should always reverse engineer and protect the bottom line first and foremost before looking toward expansion and growth.

My "cash only" mentality has served me well over the years in my businesses and real estate endeavors.

Especially when things turned South and they always eventually do.

Start slow, start small, buy with cash and build from there.

Just my opinion and wishing you much success

ps. Section 8 changed the rules of the game recently. We manage 400+ units and only a handful are Section 8. Not a fan of it and never will be. Why? Because I don't control the process.

I don't think this is wise.

HELOC's are a great tool if you use them correctly. But using that money as a downpayment is not "correct".

For starters, it's almost guaranteed in this environment that the interest rate on your HELOC is higher than your CoC returns on the properties you'd buy.

That doesn't make sense.

Beyond that, how will you pay off the $400k HELOC balance? What's the plan there?

HELOC's make sense when you can do value add. That generally means buying cash, doing a rehab, and refinancing. Then using that cash to repay the HELOC in full or close.

That's exactly how I built my portfolio in Detroit. I wasn't able to fully repay my HELOC with refi proceeds but I was throwing the monthly cash flow at it as well.

I used 70k of a Heloc on my primary property to use a down payment on 1 duplex and 1 triplex. The Heloc cost me $600 a month and the duplex brings in $2,200 a month (minus $1,000 in carrying cost) and the triplex brings in $3,200 (minus $1,300 in carrying costs). 

So that 70k worth of Heloc brings me in a net of $2,500 a month.

I just told the primary residence and paid off my loan and Heloc and taking the additional $55,000 to get a few more properties.

I could have used it for more if I had BRRRR back then but still a great return. So in short, I say use it. But agree with others that if it's a new area I would start small and get 1 or 2 properties while you get a solid team set up.

Quote from @Cody Flicek:

Hello everyone Cody here. I was hoping to get some advice on how you guys are finding these multi family deals. I'm 20 years old and don't know anyone really in the multifamily space. Are you guys using websites like crexi and loopnet, or is it better to go for off market deals, and if so how are you guys finding these deals off market?

Thanks for the advice I appreciate everyone!

Hi Cody,

We've been in the multifamily business for over 15 years now. I'd be happy to help you on your road to becoming a successful investor. 

Feel free to reach out if you have any questions or need guidance.

My thought is do what you have to do brother... We started out by raiding my 401k, including the penalty, because we didn't have a lot of money available to us. We started one house at a time, and had to roll the dice a few times, but it turned up pretty good for the most part. 

Having that HELOC available to you is a fantastic tool, you just have to use it appropriately. Do you have W2 income to pay it back? Don't think that when you get a bunch of properties that they are going to pay it back for you right away. If you use a HELOC, I would think about a BRRRR-ish strategy (No perfect BRRRR exists right now unless you go full off-market door knocking/postcard campaign/etc) to where you can refinance and get some of that money back, so you don't have $25k chunks of money at a 9-10% interest rate floating out there indefinitely. But again, it's a great tool to have in your toolbelt in case something pops up that's fantastic and you have to move on. Cash is always King, and a HELOC is basically cash. Get into the property with cash and refinance on the back end with a commercial loan that doesn't require a 12-18 month seasoning period. Just some thoughts for you, best of luck!

I like the comments that @Dave Poeppelmeier made above.  I would have said a very similar thing. 

I like a HELOC for an emergency fund, as well. When we needed money it wasn't available due to low FICO scores from remodeling, DTI and so forth, so when we think of a possible financial pinch coming in advance, and can draw from a HELOC, that helps out a lot. I also raided my retirement fund and am pleased that I did. We are at 39 houses and counting. We will sell some of the lessor houses in the future and pay off some others.

Hey @Amani Abdel-Dayem

I know of a great community of agents and wholesalers in the northern New Jersey area! Reach out I’ll put you in touch with them. They do a lot of training and have a lot of investors that will buy your wholesale deals. one of the best communities I’ve ever heard of, wish there was one like it in my market 🤣

Quote from @Michael Bishay:

Quote from @Jonathan Greene:

You are talking about this like it's a video game where you just can collect things for prizes and it all works out. If you have no experience investing or as a landlord, or with Section 8, why would you take a second loan on your home, barrel your equity in it, and invest it in an area you seemingly don't know? Section 8 can be successful and to be successful, multiple is better so you learn and perfect the system for the area, but it can be very hard from afar and very labor intensive on the landlord side.

I appreciate your response. I do own 2 section 8’s in SC, 3 Airbnb’s and 3 doors in Bergen county NJ.  Your from jersey it seems so your familiar with the area.  So I’m not looking at this as a video game.  In addition, I manage a 600MM book of business at one of the top 4 firms. 

So I’m not looking at this as a video game, just wanted to get people’s opinion.  I have a ton of money in my home which is just sitting there. Why not use it? 

I don’t know what I don’t know and wanted to see if anyone has done this before or has any insight. 

Thank you in advance. 

When you say, "I figure 25k per property can get me to about 16 SFH (Give or take), that is what I was talking about. Where are you finding 16 SFH houses for 25k or if you are saying 25k downpayment on each, now you are leveraged on 16 low-income houses in Ohio. It's good that you have experience with a couple in SC, but it would wiser to do more around those instead of opening another market on Section 8.

With your experience, your question should have had a bit more information. It sounds like you are ready to just toss the equity into something large, in many short parts, and that's a bad starting point in my

You are talking about this like it's a video game where you just can collect things for prizes and it all works out. If you have no experience investing or as a landlord, or with Section 8, why would you take a second loan on your home, barrel your equity in it, and invest it in an area you seemingly don't know? Section 8 can be successful and to be successful, multiple is better so you learn and perfect the system for the area, but it can be very hard from afar and very labor intensive on the landlord side.