In the future, I'd like to turn my SF into a rental. I want to eventually find my forever home and create a bigger real estate profile. I don't have a lot of money and don't plan on living in another rental. What should my next step be? Rates are high. We have equity on our SF and we're thinking of using a HELOC. Not sure if that's the best route to go so looking for advice/connections.
In the future, I'd like to turn my SF into a rental. I want to eventually find my forever home and create a bigger real estate profile. I don't have a lot of money and don't plan on living in another rental. What should my next step be? Rates are high. We have equity on our SF and we're thinking of using a HELOC. Not sure if that's the best route to go so looking for advice/connections.
Did you purchase your SFH using an FHA loan? If not, you can still apply for FHA on your next SFH as long as it is going to be you primary residence. Could be a way to purchase a new property without much cash available. Personally, I wouldn't use a heloc to then go purchase a primary residence, unless what you can rent the current SFH for enough to cover the current mortgage (assuming there is one on the property) and the heloc payments. Too much risk considering you don't have much cash reserves if SHTF.
The rental market is a fluid one and changes all the time. Most would agree that taking money from you primary residence is not a good idea at all. You really should never leverage the home you live in. If your primary home is financed with an FHA mortgage and you can get a second FHA mortgage if more then 100 miles away. If you do not have an FHA mortgage then go ahead and apply for one on the investment property. Interest rates NEVER matter and you can make money all the time. The main factor is will rents cover the debt liability and can you sustain 3-4 months of no income to cover the debt? Be creative on your purchase and get money back at closing to cover the reserves.
In the future, I'd like to turn my SF into a rental. I want to eventually find my forever home and create a bigger real estate profile. I don't have a lot of money and don't plan on living in another rental. What should my next step be? Rates are high. We have equity on our SF and we're thinking of using a HELOC. Not sure if that's the best route to go so looking for advice/connections.
Hi Jeanette,
Exciting times ahead as you grow your real estate portfolio! Like Thomas mentioned, leveraging your personal residence carries higher risk. Did you know that Fannie Mae recently lowered the required down payment to 5% for owner-occupied 2-4 unit homes? This could be a good option if you have limited funds available. Otherwise, using a HELOC might be the way to go. In today's market with high interest rates, it's most important to make sure that the numbers work when analyzing a deal. I have a cash flow analysis spreadsheet that I like to use when looking at deals for my investor clients to make sure the numbers work. I could share it with you as well. Message me if you're interested!
Agreed with the other comments about the higher risk with HELOC in this particular market. Fannie May is a good option for a lower downpayment. Otherwise, how updated is the current property you own? The market is always evolving and there may be good deals to be had near term or you may need to wait a while, depending on many factors like interest rates etc. However, since you already own a duplex and SF one idea is to invest in what you already own. Meaning you may be able to do some cosmetic or smaller renovations like bathrooms or kitchens in your duplex when the tenants turn over and those smaller investments can demand higher rents, so in the longterm you may have more cashflow from the duplex to help fund a future investment in another property while you wait for market conditions to change. Just one idea to consider.
In the future, I'd like to turn my SF into a rental. I want to eventually find my forever home and create a bigger real estate profile. I don't have a lot of money and don't plan on living in another rental. What should my next step be? Rates are high. We have equity on our SF and we're thinking of using a HELOC. Not sure if that's the best route to go so looking for advice/connections.
Hi Jeanette,
Exciting times ahead as you grow your real estate portfolio! Like Thomas mentioned, leveraging your personal residence carries higher risk. Did you know that Fannie Mae recently lowered the required down payment to 5% for owner-occupied 2-4 unit homes? This could be a good option if you have limited funds available. Otherwise, using a HELOC might be the way to go. In today's market with high interest rates, it's most important to make sure that the numbers work when analyzing a deal. I have a cash flow analysis spreadsheet that I like to use when looking at deals for my investor clients to make sure the numbers work. I could share it with you as well. Message me if you're interested!