What would you do?

Hey everyone,

New guy here, but I’ve been all over this website since the day I registered. I love reading about this stuff and I’m hoping to gain some knowledge from some of you that were in my shoes in years past.

Here’s the question–What would you do with $50k of home equity money if you were just getting started? That’s where I am right now and while it’s not a ton of cash, in my mind and in the right areas there seems like there should be some things I can get into. I’ve got some ideas of my own, but again as a new guy my ideas might not be on track.

Thanks in advance and I look forward to your advice.


Alright, since nobody bit I’ll change it up a little and see where that goes.

What amount of cash could somebody reasonably expect to invest and still be able to get in the game? I threw out my 50k amount because I’m finding some properties in the 50-60k range that need a little work and aren’t in the best areas, but they’re also not in the heart of gangland turf either.

Also, are there better ways to use 50k than to put it all in an “iffy” area?


My philosophy never put all your eggs in one basket…spread it out when you’re first starting out and find something that works for you. When you ask for an amount to expect it depends on what you’re planning on doing…hold or rehab and flip or wholesale?

Right now I’m fairly simple-minded on these things so buying with a heloc, fixing up and selling seems to be the most straight-forward program.

But, given the following situation what would you do?

I have my eye on a sfh that the owner needs out of. Listing is 122k. Realtor says I can get it at 115k. I think it’s more like 105-110. Comps are around 140-160. At first glance it needs 7500 to 15000 in repairs.

The problem is–I can only get 110 on my heloc and I know I don’t even want to do that for this situation. I’d rather use the heloc for the smaller deals of buying, fixing, selling/lease optioning.

What deal do I approach the owner with so everyone wins?



If you are planning on flipping here are two options.

  1. Conventional lending at 90-100% if the house is in good enough shape to appraise with no deferred maintenance. Limited out of pocket expense (practically none if seller offers concessions) With good credit should be easy to obtain.

  2. Hard Money at 70% of appraised value. You would need to bring some money to the table (140k value=98k loan). But if the home has repair issues this may be a good option. get into a 6 month term, fix house, sell and take your profit. Or you can refi into conventional to hold and rent. Your call.

Hope this helps. It’s pretty late so if my answer sounds a little strange forgive me please :-p


So looking at it this using a conventional loan, if I can get the house for 115k I would need to bring 11.5k (90% ltv=103.5). Add another 15k for expenses and now I’m in for 26.5. If I’m able to sell at 140 I’m up 13.5 minus any incidental expenses that come up.

Using HM I’m looking at 17k of my own cash plus 15 more for repair expenses and now I’m at 32k spent. Selling at 140 am I only 10k up?

Somehow I think I’ve done the math right, but I don’t like the size of the the numbers turning up. The percentage return seems ok though or am I misreading everything here?



I’m not sure if I’m missing something but those #s on the conventional loan do not make sense. Is the property in at least average condition? Any broken windows? Walls toren up? Bathrooms disassembled? If so, a conventional lender may not touch this.

If you purchase a property for $115,000 and put $15,000 into it, your total expense is $130,000 (assuming seller covers costs which it would probably be very tight). If you sell for $140,000 your profit is $10,000.

Same with the HML. No matter how you look at this your profit is only going to be the differnce of what you sell it for minus the expenses. You’d make less using a HML becuase the cost of points and higher monthly interest payments.

This may be a good property to start with for experience even with low profit. How long will this take? To you, is $10,000 justifiable for the amount of time you’ll spend on the property.

yes, no matter which financing you use, your profit should be similar. the only difference between the two options are closing costs on the loans (hml are more expensive). But you may have to use hml if the house needs extensive repairs as was explained before.

If you can use conventional you can benefit from it. But hml is a great backup and should allow you a profit very similar to conventional.

Mark and Ben,

thanks for the insights. In the eyes of a lender I’d say the prop is in average condition.

I did a poor man’s comps in the area (closing transactions on the street for the past few years and driving by to evaluate similarities/differences). It’s a subdivision where every house is pretty much the same. 2005 sales–157k and 110k
2004 sales–150
2003 sales–119.5 and 129
2000 sales–165 (not sure how this happened)

I’m comfortable in thinking 140 would work and I agree that if I can do this one, break even in a worse case scenario and learn from it I can move to the next one with more confidence.

Do you guys see another way into this property, perferably without my own cash? He’s about to lose the home. Could I option the owner, if so at what price (i’m not sure what he owes)? I do the work for 15k and then hope to sell at 140. That way I’m only out the 15k plus carrying costs. I apologize if some of this seems simplistic or for that matter unrealistic. I just want to make sure I’m looking at it from the right perspective. For that matter this may not even be a workable deal with the numbers I’ve developed. That’s the reason for my posts. Thanks again for any other insights you might have.


If you use the HML, the seller may be able to hold a 2nd which would elliminate you having to bring in funds. But at 5-6 points and 14% interest your profit of $10,000 would go down to about $2-4K.

You might be able to bargain for lower points. but hml with a seller carryback would do the trick.

The more I read, the less I like this deal. Thanks for the insights. I’ll ask around the realtor, see where the owners numbers are and find out if there’s anything else I can do.


Sounds like a good place to get started might be to set some goals and kind of know where you want to go with this. Working with an owner on financing, with a realtor that is ok with creative offers can be good. I have found if you have good team members-especially someone in the area of mortgage lending and a good buyers broker it helps out in being a little more cautious at getting started. You are on the right track in thinking things through carefully before you invest.