What’s the best path forward?

4 Replies

I'm looking to buy a duplex to house hack to save more money to put towards real estate investing. I own the home I live in now, I bought it for $142k, I owe $136k principal balance. When I bought the house it appraised at $169k I've since put about $10k into it and a real estate agent I talked to said it's probably worth about $180k now. I bought this house with a USDA no money down loan and my total mortgage payment with everything included in it is just a hair over $1100 a month, I can rent it for somewhere between $1400-$1600 a month in my area. My question is should I use a heloc to pull the equity in my house to put down on a duplex to live in and rent out the house? Or what other options do I have? I don't have enough in savings to cover a down payment right now and my current income level doesn't really allow me to save much of anything. Any help or thoughts about how to move forward would be greatly appreciated.

Hey Mike, 

I’m new as well, but have really consumed a lot of material in my short time here. It’s amazing the material/tools that are on here that can help you so much more. 

If I had to put myself in your shoes I would Use one of my freebie rental calculators to see what the cashflow on your current house would be if it was rented. If you have at least that base hit to a homerun you should feel pretty good. What you don’t want to do is end up taking a heloc and being negative on cashflow. 

Secondly talk to a lender. See if an FHA loan is possible to get into the duplex. Then you only have to do a 3.5% down. You may have that on hand or can then use the heloc. I would have all the numbers down and make sure this works out for you before committing.

I think you have good options, but would definitely consult with a lender. Maybe check the network tab for lenders in your area that are on this page. See what they think as investors and what they can offer as a lender. Maybe also find an investor in your area who may be willing to help you run the numbers or who may want to partner with you and knows that the property will be managed well thanks to their live in partner. Skies the limit and the more you learn the more you can figure out a method that allows you to win. Best of luck!

@Mike Staehle

There's a lot of information you haven't provided, but if I had to guess, I would probably say you are house poor. My first thought on reading your story is that $1100/month is an awful lot of money to commit to spending every month on a mortgage. And when you make a wide blanket statement like "My current income level really doesn't allow me to save much of anything," I think we can also safely assume that you also have a car payment, of, say, $500/month. So that's $1600 after-tax dollars disappearing out of your income every month, and if US general statistics on household hold true, that'll mean that your after-tax income level every month is somewhere around $3K. Is that correct?

You look young in your profile pic. Are you married? Do you have kids? Or are you just blowing $1100/month on your own one-person living expenses?

@Jim K. I don’t have any other bills besides electric and internet. And yes my income in around $3000 a month. I’m single with no kids so living in a single family house is just a waste of space and money for me. I bought the house when I was 23 and thought I was being financially responsible until I found this website.

@Mike Staehle

Thinking about this, it's probably better if we discuss your personal finances out of the spotlight of the open forums. I'll send you a friend request. Thanks for being so open.