I Used a HELOC To Buy an Investment Property (Was It a Good Idea?)
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Күн бұрынIn this video I talk about how I personally used a HELOC, Home Equity Line of Credit, to buy a cash flowing investment property! I will be talking about how to use a heloc to buy an investment property! #HELOC #homeequity #investmentproperty
📺Watch Next:
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HELOC vs. Home Equity Loan - • HELOC vs. Home Equity ...
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Time Stamps//
00:00 Introduction
00:52 What is a HELOC?
01:34 Purchasing an Investment Property W/ a HELOC
03:16 THE NUMBERS!!!!
06:10 My Mistakes With a HELOC
08:23 Should YOU use a HELOC to buy an Investment Property?
WHO AM I?
My name is Evan Phoenix and I am a Real Estate fanatic trying to reach financial independence while educating as many people as I can along the way 🤙
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@evan_phoenix Жыл бұрын
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@dendrxxoliver2712 Жыл бұрын
Thank you so much for the insight. I’ve been looking to put my equity in my give to work and this video was very helpful..
@evan_phoenix Жыл бұрын
Of course!
@caseyadams2627 Жыл бұрын
I have my consult for a HELOC this week with a credit union. Looking to buy in OK. I want to buy the property completely in cash, BRRR it, then refinance it to pay the HELOC off. Even with holding the HELOC long term, cash flowing almost $400/month is great. I hope I can slowly build a portfolio with several properties that cash flow like that. Thank you for the transparency!
@evan_phoenix Жыл бұрын
That’s awesome! Best of luck and as long as the numbers make sense that’s all that matters. Have a plan B for paying of that HELOC and you got this! Best of luck!
@nixonnguyen2443 Жыл бұрын
Thank you for sharing!
@evan_phoenix Жыл бұрын
Of course!
@manyourcoolchris 11 ай бұрын
Super helpful
@evan_phoenix 11 ай бұрын
Thank you! I’m glad you found it helpful🤟
@PSU5015 4 ай бұрын
Some lenders let you lock in interest rates 3 or so times a year on your HELOC so if it comes down you can lock it in doesn’t have to be variable all the time. Great advice. Someone mentioned in the comments already but I have to agree self managing will save you money just until that HELOC is paid off.
@evan_phoenix 14 күн бұрын
Great advice thank you, I actually reached out to my lender to confirm! And I just took over self managing! I should be asking you for more advice! thanks!
@jbivphotography Жыл бұрын
Pretty solid. I'm hoping to do something like this at some point in my life. Thanks for sharing.
@evan_phoenix Жыл бұрын
Thanks John! You got this, just remember to make sure the cashflow can pay off the HELOC!
@yubee512 Жыл бұрын
@@evan_phoenix Hey Evan, how long does it take for you to pay off the HELOC? I know there are also fixed HELOC too.
@evan_phoenix Жыл бұрын
@@yubee512 Hey Yubee, It all depends on how much you use of your HELOC and your strategy! I am using the proceeds from my cash flowing rental property to pay off my Heloc, and should be paid off within 3 years. I always try to pay off any debt I leverage in real estate within 3-5 years (But the sooner the better!)
@yubee512 Жыл бұрын
@evan_phoenix thanks bro. I have been very very nervous about the HELOC thing. I talked with my lender today and he said they have a fixed the HELOC so I was kind of relieved about it. But yeah you are right. Cash flow is the key to pay that off huh. Thanks man!!
@evan_phoenix Жыл бұрын
@@yubee512 Of course my man! and a variable interest rate is scary, just have to be very confident in your numbers! if you are able to get a fixed HELOC, I would 100% do that even if the rate is a little higher. Just account for it in your numbers when analyzing your ROI to whatever you put that money towards!
@luisrivera5314 11 ай бұрын
Thanks a lot
@evan_phoenix 11 ай бұрын
F course!
@luisrivera5314 11 ай бұрын
I subscribed
@evan_phoenix 11 ай бұрын
Thank you!!
@MoodyWealth 14 күн бұрын
Love the information! So the bank required that you do 25% down payment for the terms of your commercial loan I assume. But to produce that capital to close on the duplex.. financed the down payment with capital mostly from the seller finance. How did you get the seller finance/get the seller to agree to this? This is a key detail in this property purchase.
@evan_phoenix 14 күн бұрын
Thank you! Yes you are correct as far as 25%. Honestly it was building rapport with the agent, explaining the benefits of delaying / reducing capital gains by spreading out the payments using seller financing, etc.
@kateribeiro3636 7 ай бұрын
What are you thoughts on using home equity fixed loan for long term rental? If you buy property by paying for it in full and can refinance down the road? Still saving on closing cost. Assuming there is enough equity to take out.
@evan_phoenix 7 ай бұрын
I personally like using a HELOC for shorter term debt. But in the scenerio where you purchase a property with a fixed HELOC and you pay the full amount with that HELOc, I would just make sure the numbers work to make really good cash flow and have a plan to refinance within 3-5 years.
@joshsimmons9028 10 ай бұрын
Question - Why do you pay for any tenant utilities? Ours pays for their own, & it doesn’t affect rents vs. what’s available on the market.
@evan_phoenix 10 ай бұрын
Do you have a single family rental or multifamily rental? My rentals are multifamily and each building has only one water meter meaning that in our 4 unit, the one water meter Is being used by all the tenants. Since I can’t accurately find out how much each units usage is, I set a flat fee per month for my tenants which includes water/sewer/trash. On a single family rental you wouldn’t have this problem. Does that make sense?
@joshsimmons9028 10 ай бұрын
@@evan_phoenix we have both. You can just install a water meter for each unit, costed us $450 for each install.
@evan_phoenix 10 ай бұрын
@@joshsimmons9028 oh awesome! I’ve heard of those, but that doesn’t help with sewage bill , correct?
@evan_phoenix 10 ай бұрын
@@joshsimmons9028 also what brand do you use for the water usage devices?
@LeoCampos2 9 ай бұрын
Hi Evan, Can you please share the name of this program you're using for these calculations? Thank you.
@evan_phoenix 9 ай бұрын
Hi! That’s actually a excel spreadsheet that I created myself!
@LeoCampos2 9 ай бұрын
@@evan_phoenix 🙈 I wish I had that knowledge!
@johnnyb33good21 4 ай бұрын
It's not an "if," but "when" question. Repairs and maintenance Capital expenditures Vacancy Are going to happen whether we like it or not. I currently own 45 multi-family homes in the Phoenix metro of Arizona and learned the hard way through the years. You must account for these things and set aside reserves Your expenses are a little light. Either way good job taking action. Tenants paying down your debt over the years, rent increases and your value increasing with tax benefits this property will be in a good position in a short time
@evan_phoenix 14 күн бұрын
Thank you for your reply. Looking back I can definitely agree they are a little tight. Luckily I took action and it has worked out in our favor. I am very impressed, how long did it take you to grow to 45 units?
@johnnyb33good21 13 күн бұрын
@evan_phoenix I bought my first fourplex in 2017 at the trustee sale auction. Biggest thing that helped me was house hacking. Using owner-occupied low down payment loans to buy 4plexs. I lived in one unit after a year I move out go get another one. I've used my VA home loan 0% down three times for 4 plexs, I've used FHA 3.5% down one time, I've used Fannie Mae 5% down one time which is awesome cuz you can negotiate a lower down payment and lower interest rate
@johnnyb33good21 13 күн бұрын
@@evan_phoenix I actually just closed on another 4plex June 3rd 2024 in Mesa Arizona for 1 million. I used Fannie Mae conventional 5% down so I have 49 units now
@evan_phoenix 13 күн бұрын
@@johnnyb33good21 would love to connect if you are willing? Always want to learn
@Frankyblk24 11 ай бұрын
Hey. As for “commercial” comp. Who did you go with?
@evan_phoenix 11 ай бұрын
I went with a small local bank!
@falayyou 9 ай бұрын
Do the tax benefits from interest deduction offset the extremely high interest rate you’re paying that comes out of your cash flow? I would think doing a heloc now with rates where they are is risky if the property doesn’t have extremely high cash flow potential. even then you don’t have much cushion for unforeseen expenses.
@evan_phoenix 9 ай бұрын
The benefits of owning real estate, the deductions, loan pay down and cash flow offset the high interest rates. But like you said, the property needs high cash flow for unforeseen expenses. Or has to be a property in a high appreciation market
@muhraf3751 8 ай бұрын
You have to pay a balloon payment of 60k in 5 years, if you divide it over 60 months (5years) that’s 1000 per month, even if we consider heloc at being 130/month you’re cash flowing about 600. That’s not taking into consideration any repairs. Your mortgage payment is mostly interest maybe 400-500 a month towards principal. You’re most likely loosing money for at least 5 years. That’s a lot of free work for a very long time. Yes you get depreciation that you can right off on you taxes but that’s very nominal (you probably save 200/ month on the high end)
@evan_phoenix 8 ай бұрын
Love this! so we are applying $400 a month to the heloc which like you said 130 to interest and 270 to principle! And with that payment we are cash flowing but nothing crazy. The angle we took with this is Location and appreciation. To date multiple comps have sold at around $330k with less income and we purchased for 270k . Also even if we break even cash flow after repairs and depreciating it at tax time. The tenants are paying down the principle for me and the appreciation has already been worth it. I’m playing the long term play with real estate. I don’t believe the “get rich” scheme with real estate. I really appreciate this and taking the time to analyze it!
@muhraf3751 8 ай бұрын
Makes sense. Thanks for sharing your experience. And happy investing!
@evan_phoenix 8 ай бұрын
@@muhraf3751 you as well!! Do you own rentals?
@muhraf3751 8 ай бұрын
I own one single family home that I own outright, in the process of buying another with a partner which will also be a cash transaction. I understand the concept of leverage but to me I rather take less risk. Leverage = Risk, I might consider using it a few years down the road but I want a strong base. The growth may not be fast but it will be gradual. Don’t get me wrong, you are following Robert Kiosaki’s principles but that’s not for me at this stage.
@evan_phoenix 7 ай бұрын
Slow an steady wins the race. That's what I love about Real Estate, there is no one "Right" way to invest and everyone can invest per their comfort level! Keep crushing it!
@VulcanKick 10 ай бұрын
Did you have a cash out refinance in the plan? It would have solved these mistakes and removed the risk of losing your primary residence.
@evan_phoenix 10 ай бұрын
Yes I did👍 and still do. Anytime you use a HELOC there is risk. But I think I limited all risk with how I used it to buy a cash flowing asset!
@eddyalmaguer1758 7 ай бұрын
At this point, does it make sense to hold off on HELOC given high interest rates? Also, how often does interest rate change on a HELOC? Every quarter? twice a year? I assume it goes down the same that it goes up?
@evan_phoenix 7 ай бұрын
So the HELOC Rate is based on the prime rate of the market. That fluctuates with normal home interest rates. On my HELOc the interest rate can change at the beginning of each month. Yes when the market starts getting better it’ll move back down!
@eddyalmaguer1758 7 ай бұрын
Thanks! @@evan_phoenix
@wilson0780 Ай бұрын
What lender allowed you to use seller financing as down payment? Might be someone I use in the future
@evan_phoenix 14 күн бұрын
I learned this from a buddy of mine that crushes in investing, great way to invest! It was a small local bank. Try all of your local banks and I bet they would. I found two near me
@MSHairCandy 3 ай бұрын
hi what commercial product did you use?
@evan_phoenix 14 күн бұрын
I used a commercial loan and Seller Financing
@user-hq4oe4em1u 7 ай бұрын
My rental property has 100k+ equity and is on a 30 year conventional loan. I am trying to use the equity to buy another rental property. I am having trouble finding a lender that will give a HELCO for a rental property.
@evan_phoenix 7 ай бұрын
Finding a bank to give a HELOC on a rental is hard, but possible. Contact all local banks and Credit unions to see if they will. But also, ask local banks if they can use collateral on your rental to go buy another property. This is a concept I’m learning about and will be utilizing shortly
@willyoung6891 6 ай бұрын
To say that finding a lender that does helocs against rentals is hard is a huge understatement. It’s near impossible and that’s why not a single KZfaq video that discuss helocs can ever name a single lender that does it.
@evan_phoenix 6 ай бұрын
@@willyoung6891 I agree it’s super hard, but like I said not impossible. I reached out to a lot of banks and found one that was willing to do it in 2021. I still have that HELOC today and they have agreed to increase to HELOC limit just recently. If you can’t find one, I’d be interested in seeing how many banks you’ve actually reached out to, because it probably not nearly enough. One of my favorite quotes is “you’ll either find a way, or find an excuse”. Best of luck!
@Adam-gg7ps 4 ай бұрын
My small local bank would not do it for me personally, but would do it for an LLC. So, I did it through an LLC.
@sksk2411 3 ай бұрын
Is interest paid on a HELOC deductible? some people said its only deductible for main home or second home buy,build, or improve. Other people said buying rental is also deductible, i dont know which one is right
@evan_phoenix 14 күн бұрын
Ask your accountant! I believe you can if you buy a investment property, second home, or vacation home. Not if you fix up your home. That is what I believe, but ask your accountant!
@doublevillageman Ай бұрын
Hi Do you use people good credit score to apply loan for investment property. Or recommend me who does.
@evan_phoenix 14 күн бұрын
Not sure if I understand the question but thank you for commenting!
@stanmoney8470 7 ай бұрын
I'm hearing HELOCs now have some locked rates !
@evan_phoenix 7 ай бұрын
Yes they do! Will be going over that in a new video coming up👍
@HappyLife-zt9eu 4 ай бұрын
What bank did you use? BOA told me you cant use Heloc for investment.
@evan_phoenix 14 күн бұрын
A small local bank in my area. Try reaching out to all of your local banks, they are more flexible
@IllusiveMan343 5 ай бұрын
The seller financed 60k? ….you won the lotto.
@evan_phoenix 5 ай бұрын
Yup! Not sure if I agree about winning the lottery but it was great! I know some people that have gotten seller finance 2-3X the amount of what I did. A lot of it is educating the seller in the benefits and why it’s a win win
@evan_phoenix 5 ай бұрын
My very first deal was another 60k seller finance. PP of 67k, 60k seller finance and 7k down. So I was able to get it twice, I also talked to many many sellers and got rejected
@IllusiveMan343 5 ай бұрын
@@evan_phoenix we are considering a HELOC for our first investment in a duplex which will need about 80k-90k down. I’ve estimated we can gross $2700-$2800 each month before utilities. What do you think? Also, are you able to share your spreadsheet as a Google doc? Thanks!
@AJMALCOMB 10 ай бұрын
A balloon finance and a HELOC, man that makes me nervous..
@evan_phoenix 10 ай бұрын
I’m not going to lie, I was too. But based on the numbers and recent comps, I’m very confident in it now. I like to call it calculated risk. This is not a strategy I would use unless it was in a market I knew like the back of my hand🤟
@acceleratingalpha 10 ай бұрын
No CapEx or vacancy?
@evan_phoenix 10 ай бұрын
@@acceleratingalpha typically I would but with this property we are not touch the cash flow at all (meaning we are not taking that and using it for personal expenses) all the money we make from this currently is being put in its bank account and stacking up! So technically we are using all of the cash flow as vacancy and reserves
@privateprivate8366 9 ай бұрын
I am CHICKEN!😂 I am probably about to take out a HELOC. But it is to simply pay off about 1 years property taxes, for the house I’m inheriting. It is mortgage free. Didn’t pay anything while going through probate war. The amount is for $22K. But, although I have a good job,‘I went through the recession and trust absolutely NOTHING. So, I really don’t need the HELOC and could pay it all in cash. I’m merely apply for a loan, for unforeseen surprises with the house, since my mother was a hoarder. Other than that, although I’m not a contractor, I am handy and have always been so, in my apartment.
@ferris_outdoors5866 15 күн бұрын
Seems like a huge headache for 300 bucks a month.
@evan_phoenix 14 күн бұрын
Outside looking in, I see how you'd think that. But since purchase I have gained $55k in equity, rents have dramatically increased and now my cash flow on that property is close to $800 a month. Tenants pay down my mortgage every month. Depreciation tax benefits at end of year. Etc. A lot more than 300 bucks
@jayraymond9707 6 күн бұрын
You’re also forgetting the fact that the mortgage is effectively paid for, and the value of the property is going to go up in value. Someone is paying for your mortgage on an asset that will likely only appreciate in value.
@evan_phoenix 6 күн бұрын
@@jayraymond9707 exactly
@jayraymond9707 6 күн бұрын
@@evan_phoenix I’m working to rent my primary and move. HELOC has about $160k available. Moves like this need to be thought of as long term, not month to month.
@fmc93b 7 ай бұрын
Where does this guy live to find a property for 270k
@evan_phoenix 7 ай бұрын
Maryland! Where is your market?
@fmc93b 7 ай бұрын
Miami
@mikelopez4148 4 ай бұрын
Such a bad time to do anything with Biden in office im waiting till trump gets back in rates go down and il heloc into a 4 unit property. Also you bought a 2 unit at a wrong price !
@Apexplyr 2 ай бұрын
Biden doesn't control rates. Trump caused rates to go up. This all started from trump stimulus and his pressure on the Fed to print money!
@evan_phoenix 14 күн бұрын
I hear ya, but its not timing the market, it is time in the market! Sounds cliche since a lot of people say that but I believe it as well. Also, That property is working in our favor right now. It's all about knowing your market! Thanks for the comment!
@evan_phoenix 14 күн бұрын
May not agree with you but thank you for the comment!
@zeekflash6924 Жыл бұрын
Self manage , use the $200 to pay down , heloc .. if possible
@evan_phoenix Жыл бұрын
That’s a great idea! Only thing is Our property manager manages all our properties and in our eyes is worth every Penny! We decided before investing that we will hire a PM for my wife and i’s properties. So we just analyze with a fixed expense of PM. It’s all about personal preference
@osmosisreacts Жыл бұрын
@@evan_phoenix Getting a property manager comes down to is the money worth your peace of mind. It’s a good trade off if you can budget it
@evan_phoenix Жыл бұрын
@@osmosisreacts honestly I could not agree more!!
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