Financing First Rental Property

2 Replies

Hello, would someone be willing to help me analyze whether I'm financially ready to purchase my first rental? I'm considering taking out both a HELOC and obtaining a loan for the rental property, but I worry that I'm getting in over my head. I have 70% of my primary residence paid for, and significant retirement assets, but very little income.

Please message me directly if you're willing.  Thanks in advance!

@Ryan H.

Hi Ryan,

I would suggest determining what your goals are for investing. Are you looking for monthly income (rentals -cash flow), are you looking for growth/appreciation (BRRRRs, flips), or both? It sounds like you have the means to invest in whatever you like with the equity in your home and retirement savings. 

Have you considered a cash out refinance as opposed to a HELOC? 
What is your comfort level with leverage? Is your goal to own properties free and clear?

I know I am posing a lot of questions but it is just to make you think about what you want. I think it is very easier for new investors to jump into an investment just for the sake of jumping in but if the investment doesn't align with your goals and ultimately what you want then it is not the best decision. I would advise determining what you want out of real estate investing while also evaluating your position to reach your goals.

Hope this helps! If you have any questions or want to further discuss your financial position with me, feel free to reach out!

@Ryan H.

That is awesome you have so much of your primary paid off already!

The HELOC, you could always wait to pull out until closing on the investment property.

When applying for the loan, with conventional they are going to look at your DTI's and will look at 75% of the rental income on the property to determine if you qualify for the mortgage.

If your income is too low to qualify than you will have to go the route of a portfolio loan that only looks at the cash flow of the property or bank statements.