Financing for next property (while not compromising next primary)

[John P.]

I currently own and live in a 3 family, and am interested in acquiring another 2-3 family this year as investment. My family is also passively on the market looking for a SFH for us to live in, or land to build our home on.

FYI I just applied for a HELOC on my 3 family, which I suspect will be ~ $100k line once the appraisal happens (owe $200k @ 2.78 w/14 yrs remaining, suspect $450k value). We have ~ $200k 'cash' that we plan to use as a down payment for our next primary SFH/build. Income is prob ~ $150k/yr not counting any margin we'd have if our OO 3fam was fully rented.

How does one navigate this sequence of purchases without compromising our ability to borrow? What I don't want to do is eagerly purchase an investment property then later learn we can't get a loan for our SFH as a result.

[Albert Bui]

You've just asked a lending question/ mortgage planning question. The best way to situate your DTI is to lease up your unit you're currently living at in the 3 unit so you can use all 3 units of rental income to offset your monthly PITIA payment at the triplex. This will hopefully result in a positive monthly income figure.

The income will be calculated based on your tax returns for 2 of those 3 units + 75% of the gross lease for your unit that you're going to be vacating or leaving soon. The combination of the tax return filed income and 75% of the gross lease will be added together and the lender will take that "number," to subtract it from your monthly PITIA (prin/int/tax/ins/assessments) payment. If you have 2 mortgages then you'll have to subtract the 2nd mortgage or HELOC/line of credit as well to arrive at your net rental calculation upon moving out.

Once you've done the above you can be ready to purchase the new property and will have freed up all of your purchasing or borrowing power based on your 150k/yr income.

Hope that helps.