Heloc or cash out or ?

Question

I inherited a house 5 years ago in the Philadelphia suburbs; at that point it appraised for 425k. I’ve been living there primarily, but travel often for work and will be purchasing a home in Pittsburgh since I’ve been spending so much time there. My question is what’s the best loan for my situation?

The house is unique and on 2 acres, but needs serious updates and renovation. It’s got glass fuses, and oil heating to give you an idea.  Roughly 150-200k for complete update. Similar sized houses in the neighborhood that are up to date are ranging from 650-850k. My thinking is that this is my long term home for later in life, but I want to make it beautiful and use the home as a tent pole for other investments. Fix it up and rent it out for a couple years to pay down the loan and later in life make it my home. I would also want to use some of the money from the loan to buy a house in Pittsburgh in the Mt Lebanon area, which average 200-300. I would live there for about half a year, and would also like to buy a duplex in the same area at the end of that time frame to then make my primary and rent out the other side

I do have a good contractor for my current primary residence, and a good team in Pittsburgh. I am assuming there will be minor facelifts in each additional property. What is the best avenue for me to take to procure the money for the type of goals I have?

I have above 700 credit and a healthy income as a freelance photographer and almost no debt. I spend much of my time traveling, and want to make a transition to travel less and to create an avenue of passive income that could eventually become my primary source.

Any and all advice is appreciated, if I left info out, just ask.

Thank you!

Brent Coombs · Answer

@Vincent Carosso, my instinct suggests go for an owner-occupier mortgage over 30 years, against the home you already live in and own. I don't know if Lenders' rules prevent them from giving you the same (low) interest rate (eg. FHA-approved) as for borrowers who would be buying their primary with the loan (rather than renovating their primary and investing), but I'm guessing that favorable terms could be arrived at nevertheless. Your obligation of course would be to keep it as your primary for at least one further year. Not too harsh, right? [A good problem to have]. All the best...

Vincent Carosso · Answer

@Brent Coombs thanks for the advice! The  reason I was pushing the renovate and invest is that my company gives me a stipend for living and I will have to be in Pittsburgh for 7 months regardless, may as well make it work for me. I have so much to learn.