Using a HELOC to househack

11 Replies

My wife and I are looking to get a duplex or up to a fourplex in Utah county, Davis county, or Weber county. We are going to use a HELOC to buy a place, we are doing a FHA loan so we are only putting 3.5% down. We are then going to rent out the upstairs of our current residence (we already rent the basement out) and then move into the new property. Is this a good idea as long as we cash flow? Or are there any inherent risks to this strategy? Any advice would be appreciated! Thanks!

Chad

Will your current residence cash flow when you factor in all expenses, including the HELOC? Do you project that your new property will cash flow while you are owner-occupying it or not?

@Allison Stewart

Our current residence will be cash flowing, PITI is about 1200 a month and we will be getting 1800 a month. The HELOC will probably tack on another 100 dollars a month or so. I don't think we are going to be able to cash flow in the property we will move into cause we don't want to buy something we have to put a lot of capital into (hence the HELOC).. Im hoping that the income will cover 60% or more of the mortgage. We plan on doing this strategy a few times (we will only live there for a year and then rent out all the units which it will then cash flow) until we can generate enough cash flow to start putting down 20% on investment properties and fixing them up for buy and hold. I will also be managing these properties for now so I don't have to pay a property management company.

I was just asking because that's our current strategy as well. We live in the duplex we bought last year and are looking to buy another duplex in the area. Ideally, would love to live in the next one free (by using the cash flow from this one) but in our area, that may be a bit difficult. 

Thats awesome! my area is very competitive right now, definetly a sellers market but there are still some good deals, im working on a FSBO right now and think I can get a good deal, I am just making sure to cover all my bases! Ideally I would like the money that we cashflow from the property we are leaving to just build and not have to use it for the new place we get. Thats why im trying to get an idea of what my margins have to be and if this is how this strategy starts out ha.

Which bank or lender are you using that lets you put only 3.5% down? So far we have been putting 5% down if we move in and 20% down for the investment properties. Just recently we found a bank that does 10% down on investment properties.

@Kristi Harmon I’m doing an FHA loan just through a traditional lender I think the company is called integrity lending. @Ernesto Hernandez Mountain America credit union does 10% and 15% down for investment properties. Your debt to income ratio can’t be over 43% and I think they are charging 2 points now. I’m not exactly sure what there interest rates are at the moment. That’s just off the top of my head. I looked into doin one of those loans before.

That is right: Mountain America CU is doing 10% and 15% loans. You do have to pay 2.3% to MACU at closing with 10% down loan and 1.5% with 15% loan. The interest rates are also slightly better with 15% down loan. 

@Chad Davis Missed the meet up! I just barely created my Bigger Pockets account. I got married a few weeks ago and want to do the same thing, I'm living in Orem right now. Did they talk about when the next meet up would be? I'd love to pick your brain on how you're doing it and finding deals right now! The area is crazy!

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