My path to 4K gross rental income

3 Replies

I'll try to keep it as detailed and short as possible if that's possible. My plan is to house hack for the next 4 years taking advantage of the FHA loan benefits. Right now I have a 700 credit score and should be able to get it a little higher by March. I plan to buy a multifamily/duplex property next year and renovate then rent out my current home(townhouse)(rent 900/previously rented 1200 section8). I have a equity line of credit(5.2interest rate) of 34 against my house no mortgage. I estimate it would take around 10-15k to fully renovate my home. With a full rehab plumbing electrical appliances etc the house next to mine sold for 120. I don't want to hurt my credit score checking for different loans. But I wanted to get a cash out refinance with a lower interest rate pay off my line of credit and have funds for the renovation. My credit score was a 650 when I first got the line of credit. After the first duplex I plan to yearly house hack duplexes and between that time use portfolio loans to buy 40-60k rent ready rentals(rent for 800-950)(in Baltimore it's possible). All the rental income for the first 5-7 years will go toward the mortgages esp any balloon payment portfolio loans. I make around 70k a year do y'all think this would work?

SN: a friend owns a 4 bedroom single family she uses as a assisted living and suggest that I either  turn my 3 bedroom home into a group home or assisted living to reach my goal faster. If I were to do either of these things I would have her manage it. I’ve read group homes average 75-100k a year per child placement 

A cashout Refinance on your current home will get you an LTV of 80% if it is your primary and 75% if it is an investment property.

If you are trying to purchase a 2-4 unit after living in a single family, FHA is going to question your purchase. Trying to obtain more rental property as the reason, probably won't work. Conventional doesn't have as strict of guidelines and you can purchase with 15% down on a duplex and 20% down on a 3-4 unit.

Not what I wanted to hear but exactly what I needed to hear. I was trying to avoid binding up my capital with the first house. Now I’m going to get quotes from contractors for Reno in my primary home to see what numbers I need to start crunching. Might be worth coming out of pocket for my home cost. 

@Steven King

Another option to get the work done, would be finding low interest credit cards, that you can use to finance the renovation and pay off with the cash out refinance. I would recommend waiting to do the cash out refinance, until all of the renovations are done to maximize your cash out. You have to be careful about maxing out credit cards as well though as it can negatively affect your credit. But if you have maxed out an equity loan and or a line of credit this is another option to getting the rehab done if you don't have the cash. 

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