Advice on financing investment properties using Home equity

[Hans Vermeersch]

Hi all,

I'm new to the property investment world and would like some advice on the best strategy to invest in rental properties considering my situation. We have a fully paid off home currently valued at around 340000. So I would like to use the equity to invest. The typical properties I would invest in in my area would be priced around 140000, I would need to invest 20000 in repairs and the value after repairs would be around 170000 (as an example). If possible, I would like to invest in 3 of those properties over the next 1,5 years. The first property in the next few months, sec property around 6 months after that and the third property 6 months after the second.

To get to my questions, what is the best way to use my home equity for a down payment and repairs considering we might want to move within 3-5 years. And is it possible to buy 3 properties without hitting our DTI ratio. We have a combined yearly income of around 150000 and current housing expense is 8500, no other debt payments.

Below a summary of the numbers:

• Our financial situation:
• - paid off home: 340000
• - property tax+insurance: 8300
• - Income: 150000
• - No other debt
• - 30000 in cash (not emergency fund), but would rather leave this invested in stocks
• Rental properties:
• - Price: 140000
• - Repair: 20000
• - Value after repair: 170000
• - property tax + insurance: 7500
• - cash flow positive in year one
• Some financing estimates I received:
• - HELOC: 289000 max @ 3.68%
• - Home equity loan (30Y): 289000 max @ 2.99%, closing costs 8257 
• - Equity loan 15y (non mortgage style) 289000 @ 3.99% fixed 240$ setup cost
• - Mortgage 20% down 30y: 3.99%

I realize this is not a short and direct question, but I'm hoping that one of you experts could give me some guidance and advice. Let me know if you need more info to answer my question.

Thanks a lot,

Hans