Dual Transaction

4 Replies

My wife and I own an older home that need about $20K in repairs.  Based on the area we live in, our home has about $23K in equity.  Our home is currently too small for our family, so we would rather move into a larger home and convert the existing home to a rental property (this would be our first investment property). I've looked in our area and believe I've found a couple of potential properties that are in the $100K to $130K price range. The ARV of our current home would be $80K and rents in the area is about $750 - $900 per month.

Can this type of deal be done?  If so what do we need to be aware of? 

Also, how should we be presenting this when talk to lenders?

Thanks in advance for your advice...

My random thoughts -
1. It needs $20k in repairs - if you are living there it is probably more than good enough for a renter
2. My first step would be to talk to a GOOD banker.  I see you are a contractor - might be harder if self employed.  To get a loan Would probably have to qualify to carry both houses through a bank and they would NOT count any rent potential on your current home.  Although maybe you could find a creative way to rent to own/lease to own a new property and keep your old one.

What needs to be done for 20k? While you are right tenants expect a certain condition. On the other hand its not a flip. We gutted a 1600 sqft house for 12k in materials and it was higher end because we weren't smart about it (our first). 

As long as you can qualify for your next house it is a great strategy. It is how my husband and I got stated. We did very well through this method.

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Thanks for the responses thus far...

@ Kirk R. - I am actually an Engineer and my wife and I both work full time and have good incomes.  We can definitely afford the deal;  We have some concerns about interest rates and how to actually pull the money out of the property for repairs.  A representative at the bank told us that once we move we can't do a home equity type of loan. 

@Elizabeth C. - We definitely need a new roof, upgrade the electrical system and  some external upgrades as well.  I ran some quick numbers but need to get actual estimates. 

Also, how should we be presenting this when talk to lenders?

email - this post to a GOOD banker and say - what's the best way to do this?