Very unique situation: Best way to use our HELOC?

[Jonathan Price]

Hello! We are looking for some advice. This is rather long, but I feel that providing as much insight into our unique circumstances is important. So please read along, and thanks in advance!

My wife and I have recently taken full ownership of our home (super blessed—thank God!). It's a great little house, in a small Indianapolis suburb that we love, but it's very small and has very little property (900 sq. ft./2bed 1bath). Our dream is to find some property to build a home on, and we recently became parents. So, this dream has became much more of a pressing desire. 

A few caveats:

-Estimated home value is $190k, and we don't have access to much capital otherwise.

-Because we just took official ownership recently, we can't sell the property for another 1 1/2 years without paying capital gains tax.
-We also (my wife especially lol) want to get out of this house ASAP.
-We would love to be able to keep this house and make it our first cashflow property, but we've always considered it as being the down payment or capital for building or finding a home to purchase.

Being that we are in this unique situation where we have a paid off home, we want to try to capitalize on that, and begin our REI journey (always been dream of ours). With our circumstances, what would be the best route to take, in your opinion?

We are new to most of this, but we do have family and friends who are either REIs or in construction industries that we can gain additional insight and help from as well (the most successful of which has really reignited our thoughts on flipping). We have always had a dream of flipping houses, but is this the best route for our situation? Especially since we can't sell the house for a while; flip until we can? Should we use the equity to acquire another rental or rentals? Is there an option we aren't privy of? Ultimately, what options would allow us to capitalize on the equity for REI, but still grant us the ability to get into a bigger home?

Lastly, we were recently made aware of a twenty acre property with 6 rentals on it. It is in a supreme location, only about 10 minutes from our home—beautiful property, and it's a very good price, IMO. Most properties this close to Indy add a hefty premium. The land is in two lots: one 7 acre lot (4 rentals) and one 13 acre lot (2 rentals). However, the rentals are mobile or prefabbed homes, and quite old. One of them needs fully replaced, IMO; 1 is in middle of rehab; and the others are in varying conditions (all livable besides the first one mentioned). 

The owner lives in one of them currently. Only three of the rentals are currently filled, under lease for another 9 months, bringing in $3,600/month. The one being rehabbed should bring ~$1,600/month, one needing replaced or redone would bring ~$1,200-1,600/month, and the one he lives in would bring ~$1,500/month. We have walked the properties twice, and the owner is very open about options for purchasing, all or a portion (he's willing to break up the larger lot for just a place to build if that's what we prefer).

These properties aren't on the market. He's asking $600k for all of it, $300k for each lot, and somewhere below that for a lot to build on. For experienced individuals, do both lots seem like a good opportunity? Does the mobile home aspect ruin it or make it less desirable for investment? Are there unique loan options or a way to structure something like this to still allow us to flip some homes? I understand that this particular situation might be a hard one to give insight on, so any advice or thoughts would be appreciated. 

I know this is a lot, and I realize it's tough to give concrete advice. Moreover, there are likely going to be a number of differing views, and we will take each with a grain of salt. We just want to hear from experienced parties who have a better knowledge about REI as whole. About loan options that might meet our needs and so on. Again, thanks in advance, and I'm looking forward to any and all insight!

[Ned Carey]

@Jonathan Price if you have only lived in the house for a little time there may not be any capital gains to be taxed. 

If by waiting the 1 1/2 year you are referring to the exemption from capital gains for your primary residence for 2 out of the last 5 years, you have to live in it for another 1 1/2 years. Renting it out won't count. That defeats the purpose if your wife wants out of the house.