All Forum Posts by: Michinori Kaneko

Hey @Darrick Lowe

I asked some questions regarding HELOC yesterday as well, but haven't gotten much responses to it either. I would be curious to see if you get more responses. For your reference, my post from yesterday is here

Thanks Michele.  

For #2. The $2K is not monthly, its annually. that figure is net of all expenses and allowances. So effectively, if I use this amount to repay the $100K i borrowed, it would take me 50 years (actually probably less because i'd be paying off my principal early so my interest piece would be smaller). which means I will have 0 equity at 0 cost at day 1, and 100% ownership with 0 cost in year 50...

For #3. I see that makes sense. I was thinking from perspective of "not fully paying monthly payments" if that counts as missed payment or something. 

For #5. How do investors cope with that? what if I borrowed $100K and the market tanks after i used that $100K to purchase the home? Are these risks that investors that uses HELOC are considering?

Also, going off of what you said, what is the significance in cash-refi your investment property to pay off HELOC (you're effectively just swapping one loan for another). Is it just based on which interest rate is higher?

Thanks again for your opinion/advice on these :)

Hi All,

I purchased my primarily resident about 5 years ago, and thanks to the housing market in NY going up like crazy, I have a pretty big chunk of equity on it. I can take up to $200+K of HELOC at approximately 5% APR, and i'm thinking about using some of that to invest in properties.

I also recently went into contract on my first investment property (without using any borrowed funds).  Purchase price was $80K, and estimated net cashflow after vacancy and capex assumptions (pretty conservative) is about $2300 ~ $3200 annually (based on what I can rent for, which ranged from $1000~$1100 a month).  my upfront fees (including down payment, closing, fix up fees) is estimated around $32K.  

If I borrowed $100K HELOC, I can purchase 3 of similar stats property. My monthly interest on HELOC is about $410 (or $4920 annually). Obviously, if I had $2300 annual cashflow x 3 that can easily cover the HELOC interest payments + about $2000 of free cashflow. That's $2000 free cashflow, so that's great, right? However, once the drawing period of 10 years end, my monthly payment would essentially double, and that point, with the current numbers i'd be cash flowing negative. So here are my questions:

1. Who knows if I will still have the investment properties, or what my rents would look like, or how much the values have appreciated in 10 years.  Should I even think that far out, or should i aim for the $2000 cashflow that I could be getting now?

2. Do you use the extra cashflow ($2000) to payback the principal balance, or to maximize the benefit of leverage you only pay back interest only for the first 10 years?

3. Does only paying interest only on HELOC have negative impact on your credit scores?

4. Do you use HELOC in tangent to cashout refi on your investment properties, or should I stick with one or other?

5. What happens to interest rate/credit amount on HELOC if value of my home decreases significantly? can they call the balance back? Will my rates go up?

Thank you for your help in advance!

@Maria Luna

If cashflow is all you care about Jacksonville sounds like a nice place to invest.  you can check the price to rent ratio of cities Here and Jacksonville is pretty high up there.

I would make sure you get a quote on closing costs.  Note that costs may significantly differ because of accruals, but those are all estimates anyways, so I would only look at other costs (e.g. title search charge, point fees, etc.). Some may sneak in points fee and seems like giving you better interest rate but at a higher closing price so doesn't hurt to be careful about it!

Interesting thread! Thanks for good info!

Hi Matthew,

You can use cashout refi on your investment property to get the difference between appraised value of the property and your existing loan balance. for this to work, your property would have had to increased in value, and few months of seasoning (usually like 6?). Once your property value appreciates, you can refi out and get cash differential. Note that when you do this, your mortgage on your investment property will now be higher. make sure your cashflow from that investment property still can cover the monthly mortgage! Hope that helps. For more info, you can refer to BRRRR Strategy

Yes definitely invest in ROTH IRAs. Also if your company provides 401Ks definitely do them. does not hurt to diversify your portfolio!

Thanks for good thread! as a new landlord i want to know how others respond.  Roy have you tried discussing the issue with the tenant? have you actually charged them the late fees? 

Hey Jon,

Congrats on your first investment! I have an acquaintance that purchased his first property via Roofstock as well.  Seems like he's doing ok on it.  Roofstock provides lots of good data points to help you find properties that matches your criteria, but i'm wondering how good and accurate the stats they provide on their webpage are.  For instant, rent, vacancy, tax, capex, etc. Let me know once you find out how your actual compares to what they were quoting on their website! Thank