Best Way To Proceed Next?
My goal is to purchase, lease out and hold single family homes as investments.
I have bought one for $150,000 (appraise $165,000) using a HELOC drawn against my primary residence.
My thoughs are to lease it ($1,200 month), pull the cash out, replenish the HELOC and do it all again on home 2,3,4, etc
I am looking for advice on the best way/method to pull the cash out.
Also, it seems too easy? Am I missing something?
What issues might I face from lenders? PMI? higher rate? etc?
TIA
Erik
One tip I try to live by is if you can't make the deal pay for itself then don't do it. I am not fond of using my money to prop up a deal, if this was a one time event to get you started and you plan to pull the money back out and pay the note you took on your home that is fine. But if you plan on using your property or other properties to support new ventures your banker will soon see what you are doing, feel it is risky and your interest rates may go up on future deals. What interest rate are you using in your numbers ? What are the taxes, and Insurance rates for the property ? Can you give us examples on the numbers you have. What is the FMR in the area this house is located.
Well, the basic idea is fine, but I doubt you can do it with this type of rental property. You are only going to be able to cash out the new house at about 80%(70% is better) if you hope to get a decent interest rate. Even then, you are going to have to make up the difference from savings to pay back your HELOC. Then you still have the problem that you are going to have to pay a mortgage, insurance, taxes, set aside for maintenance and long term repairs. You are probably talking about having to pay out or put aside about $1200/month. So any month you have a vacancy(expect an average of 1 month/year) you are going to be paying out $1200 from your pocket.
I would suggest that you lower your sights and try to find rental properties in the $50k or less range or go with multi-units(which I personally don't like).