Switching property from primary to investment
Hello BP,
I have been lurking here for some time, and I have found this community invaluable. I recently got an interest in real estate investing. I purchased my first property about 8 months ago, and had a new opportunity come up that I don't want to miss out on.
Here is what I would like to do:
I found a home in the area I live that I would like to purchase. I will be living in the primary living space and renting out the lock off. I would like to also convert my current primary property into a rental. This is where it gets confusing for me. In order to do the deal I will need to pull equity from my current primary residence, be it a heloc or cash out refi. The cash out refi option will probably take to long to allow the deal go through, so I believe the heloc is my only route. My primary residence will apprise for about $440,000 and I currently owe $240,000. The property I would like to purchase is $450,000, meaning I would need to pull out about $115,000 to cover the down payment and PITI, I also have about 10k in the bank to use toward this endeavor.
The problem:
I am confused on how I can convert my primary residence to a rental with a heloc on it. Lets say I get the heloc, the first question is; When I purchase the new property I would like to do so as a primary residence, can I have 2 primary residences at the same time for a short period of time, or do I need to refi my current primary as an investment with the same lender at the same exact time? The next question; Can I refinance my current primary as an investment if I have a heloc out on it, or is this sort of frowned upon, and can it cause problems with the heloc?
I will also be very close to the fannie/freddie DTI limit if I pull the heloc, after I purchase the new primary with the heloc as a down payment, and re-fi my current home as investment, and factor in my other investment property, and no other debts my DTI will be at 42-43%. I have read in some places the max DTI is 36% and in others the max DTI is 43%. Which is true.
I am also open to any other creative solutions that may increase the feasibility of this deal working out. I am interested to see how some of your real estate experts would approach this deal.
Thanks in advance!