All Forum Posts by: Tom Dieringer

The general idea is to use Helocs to replicate hard money. They're revolvers - they're meant to be drawn and paid down relatively quickly to meet liquidity needs - such as making a cash acquisition or funding a rehab. You wouldn't use hard money for long term financing, and you shouldn't use a Heloc for this either. The basic idea is use the heloc to acquire and rehab the new property, then cash-out refi the new property to pay down the heloc. If the deal doesn't pencil like this, then you're taking on a heavy layer of additional risk by using the heloc for permanent financing - you basically don't have an exit.

And you're absolutely right that most deals don't pencil out right now. Finding good yields is tough in this environment.

Thanks much Patrick!

1 Vote

Beaverton, Oregon

Quote from @Ned Carey:

@Tom Dieringer you have to consider the cost of the HELOC payments when evaluating the prospective investment. If you dont include them you are just fooling yourself.

"Possibly we could invest for appreciation only if it's close to breakeven with not too much negative cash flow and the upside appreciation is very promising"

That works until it doesn't. That is a high risk investment. We have had an extended period of above average returns for real estate. That won't continue forever.

"Am I missing some aspect of creative financing?"

No but lots of other people are. They are missing the fact they are taking risks. Many are taking risks they probably don't understand if they haven't been through a downturn.

If you can't find deals that meet your criteria, your criteria is telling you not to buy.

PS: I am not saying you shoudl never use a HELOC to invest. Just understand the risks and benefits if you do.

Great comment and thoughts Ned. Thanks so much for chiming in. Good to know I'm not crazy or missing something

0 Votes

Beaverton, Oregon

Quote from @Nicholas L.:

@Tom Dieringer

you're definitely not missing anything. HELOCs only make sense as short term funding - especially with rates where they are now. i think carrying costs like interest are something investors love to omit. "I made $3000 off rental property A last year if you don't count repairs or capex!" well... you you didn't make $3000 then.

maybe you could get enough of a return on something like a STR to make using a HELOC work. but i'd never recommend that. and i think the folks who are talented enough to do that are off doing it. =)

Thanks Nicholas. Great to read your thoughts. Appreciated!

0 Votes

Beaverton, Oregon

Quote from @Jay Hurst:

Thank you Jay! I've been feeling like I'm missing some key part of creative financing because I keep getting stuck on the fact that no matter how I cut it, I'm still going to have the additional debt service of the HELOC, which makes it even harder to find properties that pencil. But because I'm still relatively new to investment real estate, I was assuming I was missing something obvious that seasoned pros know that I don't. Good to see someone in finance affirm the conclusion I keep coming to. It's hard enough finding good properties to pencil with 20-25% down, let alone a 90-100% leveraged position.

0 Votes

I'm six rental properties into my investment portfolio and have HELOCs on two of those properties as well as my primary home. However I haven't used them yet other than briefly on a flip two years ago.

I'm embarrassed to ask this question but the hell with it, I'm pocketing my stupid ego. I read about people who purchase a property, obtained some equity, and used the HELOC on that property to buy their next. But what I never hear anyone discuss is how the payments
on the HELOC, whether interest only or principal and interest, factor the overall cashflow and return? Everyone seems to talk about including the costs of the new mortgage, taxes, insurance, maintenance & capital reserves, and the vacancy projections when looking at realistic cashflow, which we already do for all the properties in our rental portfolio.

But we, like many, cant find properties that are making any cashflow sense right now. Possibly we could invest for appreciation only if it's close to breakeven with not too much negative cash flow and the upside appreciation is very promising. But when I add in the cost of paying on the HELOC as well, it gets even farther from penciling.

Am I missing some aspect of creative financing? I'm up for being aggressive but not stupid.

Thanks for any thoughts.

0 Votes

Beaverton, Oregon

Am I missing some aspect of creative financing? I'm up for being aggressive but not stupid.

Thanks for any thoughts.

1 Vote

Beaverton, Oregon

Quote from @Olivia Grabka:

@Sendil Thangavelu

Message me; I have a template somewhere.

Just curious, Olivia, did you ever find that Master Lease template and if so, are you still open for sharing? Thank you
@Olivia Grabka

0 Votes

Gainesville, Florida

Excellent. Just sent you a PM/Connect request with my full list for BA. Thanks!

0 Votes

Nice job @Katie Phillips!

Obviously I don't know the size of your house, but assuming 1050-1250sf? If so, $15K seems like a great deal for floors, paint, exterior paint, Hvac, countertops, fixtures. Would you mind sharing your contractor? I'm in BA too and building my vendor list. Happy to share back. Feel welcome to post or PM.

Also, at that price, was it in need of any foundation piers from all the sinking soil around there? I've notice a lot of discounted houses in need of that to varying degrees.

Regardless, that's a nice long distance starter - Congrats.

0 Votes

I have a personally owned SF rental property (my name on deed, my name of mortgage) that I want to transfer via quit claim to my wholly owned, disregarded entity LLC. I preemptively checked with the lender to see if they had any issues with this. They are are fine with it with one exception - I still need to leave my name on the deed. I can add whoever I wish, but my name needs to remain.

I'm doing this for legal protection. I do already have a personal umbrella to back up my rental property insurance. I just wanted another layer of protection. In my opinion, keeping my name on the deed negates the protective benefit of the quit claim transfer and holding the property in my LLC. Am I missing something?

If I'm correct and there is no/negligible benefit, does anyone recommend having an additional umbrella just for the LLC?

Thanks so much for your thoughts.

0 Votes

Portland, Oregon

All Forum Posts by: Tom Dieringer

Tom Dieringer has started 11 posts and replied 54 times.

Post: Using HELOC for next investment - what am I missing?

Post: Using HELOC for next investment - what am I missing?

Post: Using HELOC for next investment - what am I missing?

Post: Has anyone used HELOC as a down payment for investment property?

Post: Using HELOC for next investment - what am I missing?

Post: Using HELOC for next investment - what am I missing?

Post: Renting to Group Home for persons with disabilities

Post: Buy and Hold - Broken Arrow, OK

Post: Buy and Hold - Broken Arrow, OK

Post: Quit Claim Transfer to LLC but Original Name Required to Remain