Investor · Rocky River, OH · Member since 2015 · 3 posts · 0 votes
Hello, and thank you for taking time to read my question. I have never dealt with a bank or broker for mortgage services. I paid cash for a tax sale property 4 years ago. I did a substantial remodel with out of pocket money. I now live in this two bed, one bath 1,100 sq foot house. My realtor friend told me I could get 110K+ if I sold it today. I bought the house across the street two years ago in a tax sale. I paid 20K for it. I have it gutted and I'm working with a contractor. My rehab budget is $50-60K. What are the best options to finance house #2? The house will be a short term rental when it is complete. I own both houses free and clear. Again, thanks for your time.
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
4y
HELOCs are adjustable after a few years, in most cases. Some adjust after 5 years, and other after 10. But some start right off adjusting. Look at the post above, @David Krulac gives sound advice. Use 30 year fixed money where you plan on holding, skip those adjusting HELOCs and (obviously) have a plan to pay funds back.
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
4y
Congrats on your success. You are in a good position.
Regarding your #2, your best bet is to finish the work so it appraises higher, then just get a cash-out refi. You'll need to wait until 6-months after purchase otherwise they will just finance the purchase price, not the after-repaired value.
Personally, I would do a cash-out refi rather than a HELOC. Doing so puts cash in your pocket to do another deal, it improves the returns of the existing deal, and makes the property less of a lawsuit target. (Free & clear rentals are attractive for lawsuit.) If you are worried about qualifying for the next purchase you should know that the untapped amount of the HELOC counts against your debt to income anyway.
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
4y
@Kevin O'Bryan When starting out I a;lways say borrow as much as you can for as long as you can at fixed interest rates. I'd go cash out refi fixed for 30 years at todays rate. As owner occupant of #1 you can probably get 90% LTV or more. Then when #2 is done borrow the max on that one, though as an investment property you'll probably "only" get 80% or maybe 70% LTV (loan to value)
Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
4y
HELOCs are adjustable after a few years, in most cases. Some adjust after 5 years, and other after 10. But some start right off adjusting. Look at the post above, @David Krulac gives sound advice. Use 30 year fixed money where you plan on holding, skip those adjusting HELOCs and (obviously) have a plan to pay funds back.
Congrats on your success. You are in a good position.
Regarding your #2, your best bet is to finish the work so it appraises higher, then just get a cash-out refi. You'll need to wait until 6-months after purchase otherwise they will just finance the purchase price, not the after-repaired value.
Personally, I would do a cash-out refi rather than a HELOC. Doing so puts cash in your pocket to do another deal, it improves the returns of the existing deal, and makes the property less of a lawsuit target. (Free & clear rentals are attractive for lawsuit.) If you are worried about qualifying for the next purchase you should know that the untapped amount of the HELOC counts against your debt to income anyway.
Thank you for the information. Very much appreciated.