Using a personal loan to purchase a rental?

Question

Hey all,

I have a 3/3 townhouse that I bought at the beginning of this year. I lived there and rented out the two spare rooms until August when I purchased my current 3/2 home with a 1/1 guest house. I rented out the last room in the townhouse and am renting the guest house and master in the current home.

Right now I’m making about $1k a month in cashflow after all expenses including utilities. I’m considering taking out a $50k personal loan to get another rental now, renovate it, and then take out a home equity loan on it to pay off the personal loan after purchase and possibly even get enough cash out to put down payment on another rental. I would probably make an additional $600-800 a month in cashflow if it worked out.

Experienced investors, what are your thoughts on this? Would I run into any potential issues getting a home equity loan to pay the personal loan?

Sheldon Zimmerman · Answer

Good Afternoon Anthony,

This sounds like a good income property for you. That is exciting for you, great job.  I would definitely recommend doing that. But I can't speak into your financing situation because of a couple of things. 1. it depends on what your debt to income is. 2. How much you would be able to refinance after you are done with the rehab. But if you can get more properties that can create income for you. I would absolutely do it.  Especially if you can add value by the rehab you might be able to get into the property with minimal or no money out of pocket once you refinance it. Best of luck.